The first quarter of 2012 has been a great departure from the sluggish sideways market of 2010 and 2011. Even before the sales statistics for February were released, active agents on the field have seen signs of a recovering market every day in their business. Traffic on real estate websites has been up with more buyers moving off the fence and deciding to take advantage of good deals and interest rates. Listings that used to sit on the market for months at a time with no offers are now selling quickly in a matter of weeks. Foreclosure properties are being fought over by investors and owner occupants alike and banks are enjoying the multiple offers and bidding wars. Still, we should look at the statistics as concrete confirmation that our perceptions are in fact aligned with the reality.
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Houston Real Estate market stats
I want to make this very simple for you by briefly summarizing the main points. Real estate sales were up by double digits over the same period in 2011: All property sales were up 15.8% while just single family homes were up 16.9%. Inventory is down to 5.6 months: The lowest levels since right after the peak of the recession in December 2008 and down 22% compared to last year. Pending sales are up 13.5% compared to last year as an indication that the increased activity is likely to continue in the following months. Average sales price fell 4.6% as foreclosures made up a larger portion of sales: 21% increase compared to last year. Full report on HAR’s website.
Bank foreclosures and the upcoming market
Banks foreclosed on millions of homes across the country during the recession and at some point they would have to resell them to recuperate a portion of their investment. But bringing all the foreclosure inventory owned by banks on the market at once would wreak havoc on the real estate market and drop values even further. In addition since the demand for properties was barely keeping up with the inventory already in the market, dumping this massive number of homes on the market wouldn’t make sense at all. So, banks have been doing a controlled release of these properties on the market while being careful about preserving a ratio of foreclosure sales to total sales between 15-20%. This has brought about the much talked about “shadow inventory” talk that many people say can be the next shoe to drop for the housing market.
The increasing number of sales in real estate markets across the country demonstrates an increase in demand for properties. Banks are taking notice of their properties commanding multiple offers and selling above asking price so they’re releasing more properties. In February, foreclosure sales made up 23% of total sales – a figure that’s higher than the 15-19% norm of the past couple of years. This is reflected in the decrease of average sales price seen in February. Remember the median sales price for all properties in Houston is $150,000 whereas the median sales price of bank foreclosures is $79,000.
So what remains to be seen in what the banks will do as the market seasonally heats up for spring and summer. Will they bring even more properties to market to take advantage of a liquidation opportunity or will they be cautious and try to preserve a balance in the market?
What February numbers mean for Houston Sellers
If you are considering to sell your property in 2012, the environment is much friendlier this year than in years past. More buyers and shrinking inventories are a good combination and they increase the probability that your home will sell faster. But a note of caution: The majority of home buyers are still in “looking for a deal” mode so properties that are priced competitively, marketed aggressively and ready for showtime will prevail. And now they have choices: Many banks are now remodeling their foreclosures to make them more competitive with regular listings. Last, remember that there are two main driving forces behind home sales: 1) the strength of the economy (or people’s perception of it i.e. consumer confidence) and 2) low interest rates. The second factor is crucial for affordability and it comes with a time limit. The more the recovery strengthens, the higher the prospects for higher inflation, the higher the probability that interest rates may have to rise. So this may be a good opportunity for you to make your move.
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What February numbers mean for Houston Buyers
Getting a deal on a foreclosed property will be more difficult in 2012 for Buyers that approach the process unprepared. Read: What to expect when buying a Houston foreclosure before you start. It will save you a lot of headache and aggravation and will increase your chances of being the winner. Slimmer inventories and increasing buyer demand will mean there are fewer eligible properties per eligible buyer so you may need to act quickly when the opportunity presents itself. All that being said, 5.6 months of inventory is still a balanced market and therefore full of opportunities. So, get your pre-approval in order (if you need help finding a great lender, send me an email) and let’s meet to talk about your needs, wants and would-be-cools. Or just:
