The Chairmans Report

A Message from Lawrence F. Flick, IV, Chairman and Chief Executive Officer Prudential Fox & Roach, REALTORS and The Trident Group
SPRING 2013

A NEW OPPORTUNITY

SOLD

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Have you wanted to move, but have been holding off because you need to sell your house in order to buy a new one? Its easy to understand the hesitation the past five years have been tough on home sellers. With an oversupply of listings and declining prices, it has been a true buyers market. If this describes your situation, then you need to know theres been a dramatic change in the real estate market, one that favors sellers, and especially sellers whove been waiting to buy a new home. Many homebuyers have entered the market in the past twelve months, and some are frustrated by what they consider to be a lack of good choices. There has been a noticeable decline in the number of houses for sale and more buyers are discovering it harder than they thought it would be to find a suitable home. As a result, prices are rising, and yes, even multiple offers are becoming more common. This presents a tremendous opportunity for those who have been waiting to sell their present home. I believe if ever there were a time to sell a home within the past five years, its now! Months Supply of Inventory
Current MSI 7.10 2008 Peak 13.20 % Change -27% -27%

% Change in Home Sales and Homes Available for Sale

Jan. 2013 Sales Listings for Sale
Source: Trend MLS

Jan. 2011 % Change 2,703 39,675 +26% +26% -22%

3,409 30,817

Months Supply of Inventory (MSI) is an estimation of how long it will take for all the market's homes to be sold at the rate homes have sold in the past.
Source: Trend MLS

The real estate market hit bottom in 2011 and has been trending upward ever since. Today, most people believe this is real, and consumer confidence continues to rise.

WHY THIS CHANGE? Though it may seem like this change in the market occurred overnight, in reality, the conditions have been building for this emergence of serious homebuyers. Heres why: Pent up demand During the economic downturn many people held off on creating a new household, even though their life circumstances would have normally prompted a move. The recession and its after-effects seemed to last forever, yet our lives went on. People married, others divorced. Babies were born every day and kids started school. Generation Y graduated college. Boomers retired. Under normal economic conditions, these life events would have initiated moves. But the economy and declining real estate market made many people hesitant to invest in housing. Well, now the economy is forging ahead its been growing (more slowly that we would have liked) since 2009. The real estate market hit bottom in 2011 and has been trending upward ever since. Today, most people believe this is real, and consumer confidence continues to rise. Fewer foreclosures Our particular market area did not experience foreclosures and distressed sales to a great extent, so these were much less an issue here than in other parts of the country. Nevertheless, strong foreclosure activity elsewhere put downward pressure on prices in our real estate market. Now, many sellers who were under water in their mortgage payments have refinanced and rising home prices are helping many homeowners regain lost equity. As a result, there are fewer foreclosures in the pipeline. This is great news for those property owners and our real estate market.

Rising rents During and after the recession, economic uncertainty caused many people to rent rather than buy. The demand for rentals increased, so rental rates rose. Now, many renters believe buying costs less than renting, and they see the long-term value of owning a home. TAKE ADVANTAGE OF THE CHANGE, AND SELL NOW You might ask, if prices are going up, shouldnt I wait to sell my home? Prices did bottom out in 2011 and they are now rising, but the economists I trust arent predicting appreciation by leaps and bounds. Rather, they expect a slow and steady price increase perhaps 3% a year. If you wait, any additional appreciation you may gain on the sale of your home is likely to be wiped out with higher mortgage rates when you do buy a new home. The Federal Reserve Bank is hinting that these days of extraordinarily low interest rates have already hit bottom. Why take the risk of waiting? Buyers are ready to buy now. And when you think about it, isnt it about time to move to a new home that you really want, one that truly meets your current life situation and desires? If you are buying up then you get the best of both worlds. When you look for the perfect new home, there will be a greater number of choices available to you as you go higher in price range. And as a homebuyer, you also get the same benefits that the buyers of your house achieve. The combination of current home prices and incredibly low interest rates means that affordability is high. As a consumer, you have never had such tremendous real estate buying power.

these days of extraordinarily low interest rates have already hit bottom. Why take the risk of waiting? Buyers are ready to buy now.

WORDS OF CAUTION This change in the market is good news for sellers, but it doesnt mean that pricing homes is a free-for-all. There are two important reasons houses for sale must be priced correctly. First, todays buyers view their purchase as a long-term investment. They are buying for the emotional and personal benefits of homeownership, and are not being influenced by the notion of quick appreciation. Second, the appraisal process required for mortgages tends to lag behind the market. Appraisers are required to use comparable properties that have already settled. In a sellers market where demand is causing prices to rise, the settled data may lag behind the market.

If youd like to know how much your home is worth in todays sellers market, contact your Prudential Fox & Roach sales associate now. And, in preparation for buying that new home youve waited for, have your Trident mortgage consultant pre-qualify you for a new mortgage. Dont wait any longer!

Lawrence F. Flick, IV Chairman and Chief Executive Officer Prudential Fox & Roach, Realtors and The Trident Group

The combination of current home prices and incredibly low interest rates means that affordability is high. As a consumer, you have never had such tremendous real estate buying power.
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AN INDEPENDENT VIEW
Joel L. Naroff, Ph.D. is the President and founder of Naroff Economic Advisors. He is a consultant to Prudential Fox & Roach, Realtors and The Trident Group. A nationally recognized economic forecasting expert, Joel was awarded the Lawrence Klein Award for Blue Chip forecasting excellence and was the Bloomberg Business News top economic forecaster in 2008. In 2007, he received the National Association of Business Economists Outlook Award and was named the top economic forecaster by MSNBC in 2006. The U.S. economy continues to show major signs of improvement. Job gains are picking up as indicated by the 236,000 payroll increase posted in February. Almost every industry added workers. Meanwhile, the unemployment rate declined to 7.7%, the lowest level in over four years. About the only part of the economy that is still cutting back is the public sector, the federal government in particular. Indeed, if it wasnt for the potential cuts in spending and hiring that would result if sequestration is allowed to continue for an extended period, the economy would be shifting into higher gear. Instead, more modest to moderate growth is on the horizon unless an agreement is reached to limit the cuts. It is obvious that as housing goes so goes the economy. Clearly, construction employment is benefitting as are all those industries that supply goods and services to the sector. But it is the rise in home prices that is really beginning to make a major difference. When values rise, wealth increases leading to improving confidence and spending. We are now seeing increases in housing prices in most metropolitan areas in the nation. Interestingly, the major reason for the price surge is that the number of homes on the market is limited. The supply of both existing and new homes for sale is the lowest in nearly eight years while the improving economy and historically low mortgage rates are encouraging more buyers. That makes this a sellers market, especially since so many people are either under water and cannot move or continue to believe they will not get what they want for their homes. The rise in prices will ultimately lead to more homes on the market, but for now, those wanting to sell are finding it a lot easier and sometimes a lot more profitable than expected.

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