Market Details in the Middle of the First Quarter 2013

by 03 Feb 2013

To Begin the Year:  Real Estate Market Experiences a Boom

To begin the year, the early numbers reflect an earlier-than-expected boom of business for Realtors.  In this business, no one moves or buys a home between Thanksgiving and Valentine’s Day – right?  Well, not exactly – and if these unseasonal numbers are reflective of a new normal, the work week for Realtors just got longer. 

So, what does this mean for your business, and how is this shift affecting consumer behavior while home shoppers look for deals?

The data behind these trends reflect a growing trend that more shoppers are looking for great buys.  This is affecting all business entities throughout the housing market chain – from appraisal management companies, to Realtors, to mortgage companies.  This places a significant demand on a market that has seen many of its employees leave and look for work in other markets.  Ask any mortgage company how hard it is to find underwriters.  So what is driving the rush?  A fear of rising rates and the possibility of rising home prices drove borrowers to shop for homes this holiday season – and this is great news for real estate agents across the United States, especially in what I consider tier-2 markets such as Pittsburg, Pennsylvania; Columbus, Ohio; Springfield, Massachusetts; and Milwaukee, Wisconsin. 

Zillow and NAR reflect that over 42% of all borrowers identify the internet as the source for the home they purchased, and these numbers are reinforced as Coldwell Banker’s website was up 38 percent in the month of January as compared to previous month’s levels.  Zillow reveals that over 13% of real estate shoppers use mobile applications (other than desktop search) with over 35 million visitors monthly to their site. This generates over 1 million loan inquiries (monthly) that get distributed  through their mortgage marketplace. Not only are these numbers staggering – they are on the rise.  To support this further, ZipRealty, an online brokerage based in Emeryville, California, reports that its website has seen an unusual 33 percent increase in home shoppers in the first half of January compared with December.

A competitor of Zillow, Redfin also based in Seattle, received the same bump in home tours and website visitors in December by 26 percent as compared to the four-week average.  Something is driving this and, once again, the volume of strong deals coupled with the rate environment is driving the interest on the part of credit worthy borrowers. 

NAR reported that houses listed for sale in more than 55 percent of the markets received more traffic than in previous months, or in the same month in the previous year.  This activity will resonate in the marketplace and will lead to a stronger than usual first quarter for real estate agencies and mortgage lenders around the United States. 

Do you think this trend is isolated to hot weather states like the South or South West?  No.  Joe Petrowsky, president of Right Trac Financing Group, a mortgage company near Hartford, Connecticut, says he has received a much higher volume of requests for "preapproval" letters — which tell sellers that a purchaser is qualified for a mortgage loan — compared with what's typical at this time of year.

"I'm seeing twice as many buyers this January as last January," Petrowsky said in an interview. "People have finally figured out that prices are moving up, interest rates are really low, and they don't want to miss out on the opportunity."

Long & Foster Real Estate, the country’s largest independent brokerage firm, reported strong signs that spring is upon us in the housing market.  Stronger than usual home sales signs are reflecting multiple buyers competing for the same home, which either sustains the purchase price or makes it increase.  In many cases, the sale price increases above the asking price, which reflects stronger than usual demand. 

“Purchase contracts started to rise just before Christmas, which is highly unusual,” says Gretchen Castorina from Allen Tate, a firm based in North Carolina.  Multiple bids and new clients have become the new landscape.

Many investors are entering the marketplace, which is increasing the all-cash transactions; this is reviewed in greater detail below.  Simi Valley Real Estate, just outside Los Angeles, says for a variety of reasons in December and in early January, the combination of a rise in tax rates and the fiscal cliff debate, coupled with the rates in the mortgage market, it is a perfect storm for investors to take advantage of the best housing market since before the housing boom. 

Polling by Fannie Mae, the government-backed mortgage investor, may shed some light on what's motivating buyers. In a survey of 1,002 adults in December, Fannie found the highest share of consumers in the survey's 2½ year history who expect home prices to rise during the coming 12 months. Forty-three percent expect mortgage rates to jump, and 49 percent believe the cost of renting will increase.

Roll all this together, says Doug Duncan, Fannie's chief economist, and you can see why consumer sentiment "could incentivize those waiting on the sidelines … to buy a home sooner rather than later" — pushing spring behavior into midwinter.

What's missing from this equation? More owners listing their homes for sale. Inventories of available homes are down in most markets, mainly because many sellers are under the impression that it's still a buyer's market filled with smart buyers looking to buy homes significantly lower than market value.  The investment appetite driving the market has been the story in 2013 and has debunked the myth of the seasonality of the housing market, providing a consistent stream of business for companies throughout the year.  

Do Homes Sell in the Winter? You betcha.

Referring back to the good people in Minnesota and Wisconsin, are homes selling in the winter?  You betcha!  As mentioned before, the strong buying occurring in the marketplace is forcing real estate companies to take different approaches to the marketplace than in typical years.  This effect alters sales and marketing strategies of borrowers, and most importantly, it impacts specifically who you are marketing to as the buyer has changed significantly.  It is worth going into this in more detail so as you reposition your organizations to take advantage of this trend, you can benefit your team and, most importantly, your clients.

Between December and February each year, according to NAR, the average existing home sales during these months last year was approximately 4.5 million; this number is expected to be significantly higher for the aforementioned reasons.  So, the housing volume is there, in your marketplace, and someone serves these clients – it may as well be your team. 

"The real estate marketplace is open and active year-round," said Wendy Forsythe, executive vice president with Atlantic & Pacific Real Estate, a full-service brokerage firm operating in more than 20 states. "In a mobile society there are always people ready to buy and sell."

But what about in the winter states? 

At least for 2013, the market in the winter states will be very strong, and given the fed involvement in controlling the monetary policy, it will keep rates low and homes selling.  Here are a few more reasons pertaining to the mortgage and housing market:

First, did I say mortgage rates were at historic lows?  I should say this another five times in this article.

"Mortgage rates started the year near record lows, which should continue to aid the ongoing housing recovery," said Frank Nothaft, Freddie Mac’s chief economist.    

Second, home prices in many markets have begun to rebound. According to the National Association of Realtors, existing home prices in November were 10.1 percent higher than a year earlier. For homebuyers waiting for the market to reach bottom, these price increases are a signal that it's time to start looking for a home again.

But while prices are generally rising, it's also true that for the most part they remain below the highs seen in 2007, which means there is significant room for appreciation over the next 5-7 years.  For a couple in their mid-40’s or mid-50’s, buying a second home could be the best housing opportunity available to them. Also, given low rates, a mortgage payment is significantly lower than the cost to rent.     

Third, there is plenty of demand and the inventory remains high.  "Household formation is growing for the first time in several years, rental occupancy rates are at all-time highs, and everyone needs a place to live," said Forsythe. "Many people who ran into tough economic times several years ago are again looking at real estate ownership. Enough time has passed so that many of these individuals have rebuilt credit, built up their savings and now qualify for FHA, VA and conventional financing."

Fourth, large numbers of distressed properties remain available for purchase. Short sales and foreclosures represented 22 percent of all existing home sales in November. According to NAR such properties typically sold with a deep discount – 20 percent for foreclosures and 16 percent for short sales.

Forsythe noted, "Foreclosures and short sales continue to remain available in significant numbers, meaning that many buyers still have access to a large array of local properties at discount prices."

The Customer Is Changing

We traditionally associate linen sales with January, new car clearances with August and holiday mark-downs with late December – but in real estate there tends to be more marketplace balance year-round. It is true that there are fewer home sales during the winter, but it is also true that there are fewer buyers. Without such a supply-and-demand balance, home prices would be expected to plummet every February 15th, or January might be the month associated with two-for-one real estate sales. Such annual events, of course, do not happen.

Part of the reason for year-round real estate marketing is that household dynamics have changed. The greater volume of real estate sales traditionally seen in the summer was associated with the desire of parents to get children into classes at the start of a new school year. But now households with children are a smaller part of the mix. Demographer William Frey with the Brookings Institution says that over 80 percent of all households in the U.S. do not include children.  And given the aging makeup of buyers today, those qualifying are baby boomers and empty nesters, not families with children.

"The changing composition of our households impacts the real estate marketplace," Forsythe observed. "The Census Bureau says people are marrying later and household size has declined. One result is that household moving schedules are less tied to school terms."

Put it all together – rising rentals, demographic changes, tax preferences, low mortgage rates plus the availability of distressed homes – and it comes as little surprise that the real estate marketplace is open for business year-round.  So, don’t talk yourself out of a sale or take an extended vacation in February or March waiting for the business – because the business is there waiting for you.

More Homes Are Owned Outright

Related to the discussion of the changing demographic of the buyer, over 20.6 million people own homes outright, which means over 21 million homeowners have no mortgage on their homes, reported Zillow.  This is great news for agents who are looking to move transactions quickly, but bad news for mortgage companies as their services aren’t needed.  Transunion LLC supported this report from Zillow indicating that over 21 million Americans representing nearly 30 percent of homeowners own their homes free and clear of a mortgage. 

 Some of the metro areas with the largest ownership percentage are:



Ownership Percentage




33.2 %

New York







This is compared to the cities that rank among the lowest percentage of owning a mortgage free and clear – Washington D.C. (15.5%), Atlanta (17.7%), Las Vegas (18.3%), Denver (18.5%) and Charlotte (20%). 

“Homeowners unencumbered by a mortgage may be more flexible than indebted homeowners, and therefore more apt or willing to list their homes or enter the market for a new property,” said Zillow Chief Economist Stan Humphries. “By determining where these homeowners are located, we can also gain insight into potential inventory and demand in those areas."

The survey showed areas with lower home values generally have higher outright homeownership rates, as smaller loan amounts are easier to pay back more quickly.

Demographic factors, including the age and credit rating of primary borrowers, also influence free-and-clear homeownership rates. Zillow reported 65- to 74-year-olds are most likely to be free and clear (20.5 percent), followed by 74- to 84-year-olds (17.9 percent).  “This is attributed to the fact that the longer someone owns a home, the longer they have to pay off their mortgage,” the report said. However, the survey also noted that 34.5 percent of 20- to 24-year-old homeowners are also free of mortgages.

Among homeowners who own their homes outright, 44 percent have a high credit rating, between 800 and 900, while 15.5 percent of homeowners have the highest credit rating, 900-990.

This represents a strong strategic advantage for real estate brokers who specifically target baby boomers, second property investors and retirees.  This is the demographic who have the money to buy today – not the first-time homebuyer with a baby on the way.  The market has changed significantly, and as it changes, it is important that you adjust your sales and marketing strategy accordingly.

[caption id="attachment_4352" align="alignleft" width="150"]Rick Roque Rick Roque[/caption]

Any questions or feedback on this article, email Rick Roque, Managing Editor of The NicheReport Real Estate Edition, at or call him at 408.914.5895. 


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