Posted on Wednesday, January 12, 2011
The first week of January typically marks the seasonal low point for home sales, new listings, and closings, as weather and holiday celebrations keep buyers and sellers from the market, and this year is no different, according to Altos Research. The company says both home prices and inventory are down for the lion’s share of the nation’s regional markets.
Scott Sambucci, Altos’ VP of data analytics, says he expects home prices to hit a new trough in 2011, ultimately ending the year down 5 to 10 percent after some seasonal bounce during the earliest part of the year.
Sambucci sees rising for-sale inventories and diminished property quality, coupled with weaker consumer demand, all contributing to continued downward pressure on home prices.
For those out there who are optimists, Sambucci points to several factors that could feed hopeful expectations for the coming year. He says more people should have jobs as the employment picture is projected to improve, and the hint of higher mortgage rates could scare some buyers into the market and help to boost sales.
But Sambucci doesn’t characterize himself as one of those optimists. He says the industry is still grappling with a “supply problem,” and he doesn’t foresee any pickup in demand in the near-term meaningful enough to balance out the inventory overhang.
Based on Altos’ market analysis, the industry’s inventory of homes for sale has risen about 30 percent over the last 12 months – and the company expects that trend to continue into 2011.
Sambucci says this growth with consequently force prices down further, and not just because of the number of homes entering the supply chain, but because the quality of homes will deteriorate. He’s expecting REOs that began the foreclosure process back in 2008 to finally start hitting the market this year, and he says these will be homes that require the buyer to invest some cash just to make the house livable due to the nature of REOs falling into disrepair.
Sambucci also notes that the federal tax credit for homebuyers last year stimulated demand temporarily, and fewer sellers required price reductions to sell. But that incentive has passed, and he says sellers are already feeling distressed again. Altos’ data show that sellers have been dropping their asking prices since July, with price reductions now nearly back to crash levels.
The latest market stats from Altos show that home prices ended 2010 down in each of the 27 markets tracked in the company’s report, with the steepest declines seen in San Francisco (-4.77%), San Diego (-3.71%), and Minneapolis (-3.16%).
The monthly changes, however, were in line with expectations during this period of the year, Altos said, noting that the data reflect seasonal trends and will likely begin to increase modestly as the “boom” of the spring real estate market begins.
Staying with the seasonal theme, housing inventory was down across the country at the end of December. The most significant monthly drops were seen in Boston (-16.11%), San Francisco, (-14.52%), and Seattle (-14.20%).
Altos says, though, as the spring housing market starts to swing into action, a spike in housing inventory can be expected, as sellers seek to capitalize on the most active period of the year for home sales.
DS News. By: Carrie Bay