Kathy Fettke gives
timely insight on the
state of the market.
H
eadlines have been screaming about a
slowdown in housing in early 2014. This
fear is unwarranted, and simply a result
of record-cold weather across the country
that kept most people stuck indoors.
Now that the country is thawed out, it’s
not surprising that pending home sales jumped 6% in May
- the highest in 4 years, according to the National Associa-
tion of Realtors.
Home sales historically pick up during the Spring, but
here are a few more reasons why we think we’ll see record
homes sales in the next few months:
• Hedge funds have turned from buying rental property to
providing financing, helping to open up the credit markets.
• Lending guidelines are loosing up and allowing lower
credit scores.
• Interest rates are still historically low.
• More inventory is hitting the market as Spring is histori-
cally a good time to sell (this can create more sales because
there’s more to sell).
• In May, the U.S. officially recovered all the jobs that were
lost in the Great Recession.
• Wall Street “Refugees” fear the stock market has peaked,
and are finding real estate to be a more stable investment.
• Investors from all over the world have found US property
to be a safe haven for their money. As a result, cash buyers
have made up 50% of home purchases over the past 5
years!
All this demand will affect inventory levels, which
means we should expect home prices to continue to rise
this summer.
Keep in mind:
There is an estimated 3-5 million people who moved in
with family and friends during the Great Recession who are
ready to move back out. The U.S. population is growing at
4.5 million per year.
Builders came to a near stop for six years and are still
playing catch up...Warning!
While some markets are on fire, it’s important to remem-
ber that there is no such thing as a “U.S. housing market,”
but rather thousands of micro-markets all operating at
various levels of peaks and valleys.
Realty411Guide.com
Just because sales are exploding in some markets, this
doesn’t mean people are getting great deals. In fact, 35 out
of 100 major U.S. markets are already back to 2006 peak
prices! How do you know if you’re in a bubble market?
By looking at affordability levels. Is the average home
price more than 3 or 4 times the average income?
Are there more housing permits being issued than new job
creation?
Is the population growing or shrinking?
Our Advice:
Don’t get caught in the frenzy. When there is limited in-
ventory, buyers often fear there will be nothing left for them.
That’s why they make frantic offers well over asking price.
There is no need to fret. While there will certainly be less
REO inventory, other inventory will be coming on the mar-
ket in the next few years from:
• Approximately 10 million defaulted notes that were not
foreclosed upon, but rather sold as notes to large institution-
al companies. These will eventually make it to the market,
albeit likely as rentals at the outset.
• As prices rise, fewer borrowers will be “underwater” and
can put their homes on the market.
• As prices rise, builders will be able to make a profit and
will be back in business.
Continued on pg. 112
PAGE 17 • 2014
reWEALTHmag.com