March 2012 Market & Sales Update for Agents, Brokers and Mortgage Professionals

by 05 Mar 2012
Market Update   ( 3/5/2012 -- Rental vacancies fell to 9.4% in the 4th Quarter of 2011, from 9.8% the previous quarter.  This is good news as distressed housing inventory remains high, rates are low and the economy is posing marginal improvements as we close out the 1st Quarter of 2012.

Federal Reserve Chairman, Bernanke had his semi annual testimony before Congress on February 29th;  Q4’s 2011 GDP was up 3.0% from 2.8% as was originally predicted.  It is widely accepted that he has been doing an effective job in essentially maintaining low lending marginal rates for banks and stabilizing the economy, so much so that many Republicans quietly criticize him for possibly improving the economy too much too soon and spoiling the primary GOP campaign issue.

The claim that pumping money into the economy will drive inflation has proven to be false; high wages while pumping money in the economy is what drives the cost of goods; the employment rate and wages remain and high / low respectively and this is maintaining a downward pressure on inflation.   Which means:  it is and will remain, a historic time to buy a home.  Rates have gone down (again) – the 30 year fixed-rate mortgage averaged 3.9% down from 3.95% the previous week.  Rates will remain low (we are in the year of the campaign economy) .

RealtyTrac notes that sales of distressed properties made up 24% of all single family residential sales in the 4th Quarter of 2011.  (and 20% for the year).   Foreclosed properties sold at a 29% discount as compared to non-foreclosed properties.  With the amount of inventory still remaining, this will keep the appetite high for first time home buyers (who qualify) and investor buyers.  The downside to this strategy (from a sales standpoint) is it took 175 days on average to sell an REO after completing the foreclosure process (Long sales cycle).

31-34% of all home purchases were all cash buyers.  So for direct mail or target marketing purposes, households and individuals who have high expendable incomes are a good target.  Also, Baby Boomers are in a great position to buy Echo-Boomers (Children of baby boomers) and Gen X kids their first home; that is what we are seeing.  Be on the lookout for these types of buyers or those looking for a home who may have parents who can help.

The S&P Case Shiller index of home prices fell 1.1% in December from November and fell 4.0% from Dec. 2010. It is down 33.8% from its prior peak in July 2006. The index fell in 18 of the 20 cities covered by the index. It rose only in Phoenix and Miami. The decline was greater than anticipated by economists. The chief economist at Zillow predicts a 3.7% further decline in home prices this year and then prices will remain flat for yet another two to four years.

Sales Update
HARP:  According to the MBA, over 20% of home loan refi’s were for HARP loans.
Home Pricing:  Given the home price reference above, it is worth noting that once consumers feel that homes have bottomed out, most economists believe this will trigger a new wave of new purchase activity; with the distressed inventory depleting, an improving economy and rates at historic lows, the rise in wages with a, albeit slowly growing economy will drive this activity in markets across the country.
Consumer conduits.   Costco is a consumer conduit;  Members of a credit union are a consumer conduit.  The challenge for each loan officer is to think beyond the Real Estate Agent relationship.  As home buyers do more research on line, Agents are losing more and more control of the home buying process.  Outside of builders, the best way to frame your sales mindset is to target ‘associations’ of consumers.  In turn, supply your agent partners with these leads to build your real estate agent relationships.

Rick RoqueRick Roque, Managing Editor, TNR for Real Estate Agents & Brokers.


Should CFPB have more supervision over credit agencies?