As I read this editorial Can We Afford Another Housing Boom? in yesterday’s Wall Street Journal, the refrain of “Oh when will they ever learn, oh when will they ever learn?” from “Where have all the flowers gone?” by Pete Seeger (although I was hearing the Peter, Paul and Mary version), came into my head.
Some people may be surprised that the WSJ should be a critic of policies aimed at driving home prices higher, but I think what the Journal is trying to point out is that government-sponsored social engineering of the housing market is exactly what played such a large role in the last boom and bust cycle.
There are several variations of the following quote but as an Englishman I will use Winston Churchill’s: “Those who fail to learn from history are doomed to repeat it.”
“Oh when will they ever learn, oh when will they ever learn?”
With foreclosure rates dropping sharply, and the likelihood that rising home prices nationally and other measures will prevent many of those entering the process actually going into foreclosure, this Evansville Courier
article is a good summary of a recent report from Realty Trac.
Here is the RealtyTrac article Foreclosure market report
The first quarter is usually the slowest of the year for sales and that pattern continued in 2013. But that doesn’t tell the whole story. As the quarter went on, activity accelerated as I have reported in several posts.
Sales were 31 vs 27 (29 vs 24 excluding distressed sales), and the median price $497,000, up 6% from last year’s depressed level, caused by the high percentage of sales under $500,000.
The most significant statistic from Q1 is the Assessed to Sale Ratio, which compares Assessed Values to Sales Prices. When sales take place above AV, the ASR is below 100%. So the lower the number the better the market! In my year rend review Read Review I pointed out that the ASR had declined during the year for SFH sales under $500,000.
Look now at the data for Q1.
We have seen quite a sharp drop in the ASR in all price ranges. Bear in mind this data refers to just 29 sales that closed in Q1, which means sales agreed late last year into early this.
At the end of March there were a further 46 houses with an accepted offer and these, which will be in Q2 numbers, will reflect the stronger market seen in recent weeks.
Is the Federal Reserve’s success in driving down interest rates giving the housing market a sugar high?
This is the question posed by Nick Timiraos today in the Wall Street Journal online.
Reasons for the strength in home prices include:
– Inventories have fallen to 20 year lows
– Many homeowners aren’t willing – or able – to sell at prices that are, nationally, still down sharply from 2006 highs
– Demand has revved up
– Improving home-price expectations have unleashed pent up demand, as household formation in the last five years was lower than at any period since the 1960s
Result? Prices are rising as buyers say “If I’m going to get in I better get in now”.
Is this the beginning of another bubble? Not according to the experts quoted in Timiraos’ article, as prices are still below long-run averages relative to income.
I covered several of these points in my post on March 17:
How Much Will Home Prices Increase this Year
Here’s Nick’s article in full.
Jump in Housing Prices Stirs New Worry
Here is a comment from a new listing in Marblehead this week:
First showings @ open house 4/6,7. Offers held until 4/7 5pm.
In recent weeks houses have come on the market and offers have been accepted before the first public open house. Holding offers until the end of the open house allows the seller time to receive more offers. It also encourages buyers to make their best offer, which may well be above the asking price.
Did somebody say 2004?
For many first time home buyers the process can seem intimidating, but information available on the internet can help the buyer become well informed and able to be in control of the process.
This website North Shore Home Programs provides a remarkable amount of information, ranging from a step-by-step guide to home buying, to a list of programs available to help with down payments.
The greatest gift of the internet is the way it empowers the consumer through knowledge. Spending a little time on this website, and then googling “first time home buyer”, will go a long way to giving power to you, the buyer.
Knowledge helps to remove intimidation from the process of buying your first home.
Foreclosure petitions down 30%
Foreclosure deeds down 63%
Foreclosure auction announcements down 80%
The Warren Group; March 5, 2013