Housing: The Reasons It Is Coming Back

 

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Once again, my pals at KCM get it right, and put it so succinctly. I just had to pass it on.

Monday, we told you that many experts are beginning to call a bottom in house prices. Why? Writing in the Financial Times, Roger Altman, former deputy Treasury secretary, explained why he is so bullish on housing:

“This surge will be driven by a combination of improving house prices, a lower inventory of homes for sale, rising rates of household formation and population growth, and improving access to mortgage credit.”

Altman gave his thoughts on each point:

PRICES

“The S&P/Case-Shiller Composite 20 City Home Price index has risen 8 per cent since March. Indeed, Barclays has projected that, by 2015, nominal home prices will exceed their 2006 peak. Home affordability is also way up, as the ratio of mortgage payments to both income and rents has never been more favourable. Moreover, the relationship of home prices to household income is back to the level of 30 years ago. Rising prices and affordability, of course, lead directly to the buying and building of homes.”

HOUSING INVENTORY

“The levels of relevant supply have fallen sharply. The number of homes for sale has fallen back to its long-term average of 2m. Yes, there is a larger “shadow inventory” of homes that are in foreclosure or carry delinquent or defaulted mortgages. However, many of these are distressed, in that they have not been physically maintained. This means that the supply has become two-tiered – quality homes and distressed homes. For most buyers, only the first of these two markets is relevant and the supply there is approaching its lowest level since 1992.”

POPULATION GROWTH

“Housing demand is going to be strong, driven by demographics. The International Monetary Fund forecasts that the US population will increase by 15m during the 2012-17 period, more than the increase of the past five years. The two groups of the population that are growing fastest are the over-55s and the so-called echo boomers, the grandchildren of the baby-boom generation. The first group has the highest rate of home ownership. The second has been renting disproportionately, and is primed to start buying. JPMorgan estimates that 6m new units of housing are needed by 2017 just to serve the bigger population.

HOUSEHOLD FORMATIONS

“There is the coming recovery in household formation. According to JPMorgan, this rate was steady at about 1.4m annually from 1958 up to 2007. But, it plunged below 500,000 for the three years following the financial crisis, as young people moved in together or lived with parents. Now it has doubled from that level and estimates of pent-up households are at an all-time high. Most expect formation rates to rise much further still, exceeding the 50-year average for a few years.”

IMPROVING ACCESS to MORTGAGE CREDIT

“The availability of mortgage credit is starting to improve. Underwriting standards tightened sharply following 2008 and the proportion of home sales that are financed by new mortgages is now at a 10-year low. However, household finances have improved sharply, with debt service ratios returning to pre-crisis levels. Moreover, banks also need the income from originating mortgages. Mortgage credit availability is therefore opening up, which also boosts home sales.”
It seems apparent that many aspects of the housing market are in the process of turning much more positive.

SOURCE: KCMBLOG.COM

Color Matters….if your house is Turquoise, Pink or Chartreuse

Color Matters….if your house is Turquoise, Pink or Chartreuse .

There are as many prognosticators, opinions, graphs and charts which attempt to explain why a house sells or does not sell – as there are unsold houses. I try to digest all the pertinent info that my stomach can take, and then see how it relates to our local market, because, yes….all real estate is local. One thing is for certain…if the exterior of your home is Turquoise, Pink, Chartreuse (or any odd color at all) you are going to have a tougher time unloading it than if it were a simple Nantucket-Gray-with-White-Trim. There are several colorful examples here on the North Fork – we’ve all driven by them. The For Sale signs have been out front for so long, they seem part of the landscape. I’ve had occasion to get inside most of these homes and I must say --- the interiors are more often than not, a revelation. While the curb appeal of a Magenta house is limited – I’ve had buyer-husbands refuse to even get out of the car – so often the interiors are well-appointed, stylish, dream homes. Too bad that limited-appeal exterior color is keeping buyers away.

Interior paint jobs are something a potential buyer often figures into his move-in costs: A-no-big-deal-freshening-up-job which he can even envision himself enjoying on weekends (ha!!!). Painting the exterior of a house is a whole ‘nother kettle of fish. Gotta get a pro for this. Could cost thousands. This mode of thought is also the reason the current owner/seller has not undertaken the job himself. (Even though his last 3 realtors have suggested it.) Meanwhile, time marches on. The exterior is now, not only Turquoise/Magenta/Chartreuse, it’s faded and dingy, less appealing every day, while all the Gray houses in the neighborhood have sold.

If your odd-colored home has been languishing on the market, I have a piece of advice for you: “If 3 people tell you you’re drunk, lie down.” Paint the house Gray, White, Beige and be done with it. Take some fresh photos, market it like a new home and SELL THE THING!!!! 

 

I would also bet you can find a painter willing to play Let’s Make a Deal, and take half upfront and half when that “SOLD” sign goes up in front of your freshly painted Nantucket-Gray-with-White-Trim house.