Real Estate Update
Pending home sales rose again in November 2010, with the trend over the past five months indicating a gradual recovery into 2011, according to the National Association of REALTORS. The Pending Home Sales Index, rose 3.5% based on contracts signed in November. This is a great forward looking indicator because a large percentage of those homes will close escrow in the coming months. In fact, it really is a lot better of an indicator of the economy's future direction than actual homes sales. It seems like San Diego home buyers that are taking advantage of the currently advantageous conditions are going to be very happy with their decision.
Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market, he said.
If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume, Yun said. The key is going to be to make sure that mortgage rates only rise moderatly.
Credit remains tight, but even the slightest easy in lending, which would really only bring it closer to normal from its currently overly stringent state, would give the market a huge boost. In my opinion it is likely we will see this happen because it is a natural byproduct of our competitive free market system.
The 30-year fixed-rate mortgage is forecast to rise gradually to 5.3% around the end of 2011; at the same time, unemployment should drop to 9.2%.
All the indicator trends are pointing to a gradual housing recovery, Yun said. Home price prospects will vary depending largely upon local job market conditions. The national median home price, however, is expected to remain stable even with the continuing flow of distressed properties coming to the market, as long as there is a steady demand of financially healthy home buyers.
Existing-home sales are projected to rise about 8% to 5.2 million in 2011 from 4.8 million in 2010, with an additional gain of 4% in 2012. The median existing-home price could rise 0.6% to $173,700 in 2011 from $172,700 in 2010, which was essentially unchanged from 2009.
As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2-3% in 2012, Yun said.
New-home sales are estimated to rise 24% to 392,000 in 2011, but would remain well below historic averages, while housing starts are forecast to rise 21% to 716,000. That would be great news for home builders along with the greater economy. In fact, my own observations prove this to be true as a tremendous amount of land has been bought up in the last 6 months in communities like Santaluz where land prices have become very attractive.
Like I have been saying now for sometime, this is a hugely opportunistic market for everyone.
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