William Raveis Greenwich Sales Vice President, Beckie Hanley, talks about why she encourages her agents to use William Raveis Mortgage. Thank you, Beckie!
It’s a pretty exciting time for the real estate industry–major indicators are at last pointing towards the beginning of a recovery in the housing market. After consecutive years of uncertainty, fear and an all out loss of hope that things would get better, strong first quarter numbers are showing thawing compared to last year and green shoots for the spring market. The Commerce Department last week reported that new home sales in March were up by 27 percent, hitting their highest levels since summer of 2009. And a hot-off-the press report by the National Association of Realtors stated that pending home sales in March rose 5.3 percent to 102.9 from 97.7 in February, and is 21.1 percent above March 2009 when it was 85.0.
A granular look at state activity helps reinforce some of these numbers:
May 6, 2010
Emerging from the economic slowdown that began in 2007, the new home construction sales market in the Northeast has turned a corner. Although signs of stabilization vary widely by region, and even by town, there are clear signals that the rate of decline has largely leveled out and is paralleling the turnaround in existing home sales.
In Connecticut, for example, 2009 building permits should settle in the 3,000 range by year’s end. While still far short of the more than 11,000 permits issued in 2005 or the 7,746 permits issued in 2007, the slowdown may have reached its end.
High Levels of Affordability Drive Home Sales
The good news for buyers is that housing affordability is currently at one of the highest levels that we’ve seen in nearly 20 years, driven by attractive mortgage rates and adjusted home values. New levels of affordability are motivating buyers to re-enter the housing market so they can take advantage of unusually low pricing levels throughout much of the Northeast.
Sales data in some areas confirms that buyers are indeed becoming more active. The number of existing home sales in Massachusetts that were pending (or put under agreement), for example, was up 27% in October 2009 for the fifth month in a row, compared to October 2008. And both single family home sales and condominium sales were up 17% in October from a year ago, the Massachusetts Association of Realtors reported. Massachusetts realtors attribute the spike in sales, which has been more apparent at the lower price ranges, to the $8,000 federal tax credit available to first-time homebuyers.
A similar trend is apparent in neighboring Connecticut, where sales of single-family homes and condominiums rose by 11.5% and 10%, respectively, in October.
The $8,000 federal tax credit has been extended through June 2010 and the income limits for eligible homebuyers has been raised, enabling a greater number of buyers to quality for the credit. We believe that the extension of the first time homebuyers’ tax credit will continue to help drive buying activity, as will the new $6,500 tax credit for step-up buyers who wish to trade up. (“Step-up” buyers are those who have owned and occupied a residence for at least five of the past eight years.)
New Construction Pricing is Determined Differently
Unlike sales of existing homes, however, pricing in the new construction marketplace is not only determined by supply and demand, but also by the cost of land, materials and labor.
While some economists remain pessimistic, predicting that a full market recovery could take another three to five years, others sense that the worst is behind the industry and that a recovery is indeed underway. In either case, certain markets show greater resilience and tend to recover more quickly, simply because they are great places to live; many offer perennial value and will always be perceived as desirable due to waterfront locations, proximity to a major university or commutability to a leading jobs center.
Buyer Priorities Have Shifted Dramatically
Still, today’s buyers are exhibiting strikingly different buying behaviors than their predecessors did just a few years ago. Today’s consumers are opting for smaller square footage with the same quality features of larger homes and are shrewdly assessing the huge cost savings that come from heating and cooling a smaller home, not to mention reduced maintenance and furnishings expenses as well as lower property taxes.
In the past, one often universal mindset among buyers was “Bigger is usually better.” Today’s buyers, in contrast, have developed a new sensibility, one characterized by a pragmatic, frugal assessment of the “cost to operate” over the long term as well as a newfound appreciation for the financial benefits and enhanced quality of life that energy-efficient homes offer.
December 23, 2009