Home sales taking it on the chin
Last week I talked about the one million dollar and over properties that are increasing every month on Anna Maria and other desirable areas around Manatee County. But a recent report by the National Association of Realtors paints a conflicting picture of the real estate market.
On Nov. 23, the NRA reported that in spite of the housing market being on track to having its best year since 2007, the sales of existing homes fell in October after a very good September. Existing homes sales fell 3.4 percent in October from September particularly in more of the upscale markets around the country.
The NRA is pointing to rising home prices and a lack of inventory leading to fewer sales. This is combined with the social issue of adult children continuing to live with their parents rather than going out on their own. This number has increased since the recession in spite of a better economy and is keeping a large portion of potential buyers out of the market. In March of this year, it was estimated that 31.5 percent of 18 to 34 year olds are still living with their parents, and suggests that this maybe a new normal, much like some European countries.
The report goes on to say that existing home sales fell 3.2 percent in the South and 8.7 percent in the West with the Northeast remaining flat. California has been hit hard since its market has been overheated for a long time, keeping middle income and younger buyers unable to purchase.
As far as pricing, since last October home prices in the South are up 6.2 percent and in the West up 8 percent. The national median, which is the midpoint of values with half falling above and half below home prices in October 2015, was $219,600 which is 5.8 percent higher than October 2014.
If this is really indicative of a slowdown in the real estate market, it will contribute to keeping the overall economy from moving forward. Americans are saving more than they have in generations, and even though their home equity has doubled since the housing prices hit bottom in 2011, they are not tapping into this equity. Previously home equity was a virtual cash register for homeowners who needed big ticket items, college costs, cars or just feel good money. Now they are more conservative than they were just 10 years ago.
At the end of 2011, about 21 percent of homeowners were underwater, owing more on their mortgage than the home’s value, however, by the middle of this year that number dropped to 8.7 percent. Nevertheless, homeowners who were burnt by the downturn may be afraid to pull money out of their homes and are not being lured by the still very low interest rates which recently dropped to 3.95 percent for a 30-year, fixed-rate mortgage.
You can read and try and to analyze national real estate trends until you’re blue in the face, but the fact remains that all real estate is local. As we know on Anna Maria prices can and vary from street to street so nationwide events may not even be close to predicting what is going on in your backyard. But it never hurts to proceed with caution. What goes up almost always comes down, so let’s not get too overheated in our beautiful Florida sunshine.