Buyer, seller decisions will be easier

It is being widely reported that home prices are helping to spur the national economy. Since November a year ago, home prices increased 5.5%, according to Standard & Poor’s/Case-Shiller Index.

This is the largest increase since the peak of the housing market — August of 2006. The Case-Shiller report indicates that 19 of the 20 metropolitan areas it tracks have year-over-year price increases. New York was the only city to register falling prices at a 1.2 % rate.

The Greenwich real estate market is highly correlated to the New York market. So this is why prices in town have not risen. Buyers are still benefiting from low prices and interest rates.

Realtors were often told by clients they were waiting for prices to fall. But now is the time to purchase if you find a home, given inventory levels. Interest rates may start to tick up. There is pent-up demand given these developments.

Some people are tied to their homes, because their homes are worth less than what they owe on their mortgages. They are waiting to break even on their existing home and then sell.

The Case-Shiller report shows 11 cities saw price gains of 7% or more. Those cities most hit by the real estate downturn are showing the most increases in home prices. For instance, Phoenix home prices increased 22.8% and San Francisco 12.7%.

Prices are rising in most of the country because of falling inventory. Investors buying multiple homes with cash put a “floor under prices” and made other buyers more confident about purchasing again.

According to the National Association of Realtors, the proportion of distressed sales has been decreasing gradually and so have their discounts. In December 12% of sales were said to be of foreclosed homes and an equal number were short sales. It is projected that these types of sales will continue to decrease, according to Moody’s. The declining proportion of distressed sales would further minimize downward pressure on home prices. If that occurs as the economy strengthens, then the Federal Reserve may choose to increase interest rates.

Housing is helping businesses to recover as well. Americans are spending more to build and renovate homes. Companies that sell cooling and heating systems, power tools, carpets, lighting, and appliances are seeing an increase in sales. The home construction sector is showing signs of improvement. Sales of existing U S. homes increased in 2012 to the highest level since 2004. New construction increased 12% in December and ended the year with the most new homes started — 28% increase from the year prior.

December of 2012, however, showed a 7.3% decrease in the sales of new homes. A number of reasons can explain this decrease, including that there are fewer homes of new construction and buyers were concerned about the fiscal cliff. Despite the month of December, home sales finished last year up 20%. Given the number of buyers looking at properties, shrinking inventories and the likelihood of home prices and interest rates going up, people will be purchasing homes.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected] or she may be reached directly at 203-249-2244.

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