Market Watch October 2014

     I have a lot of interesting information and statistics for this month’s Market Watch, but before I start that discussion I think I should share some basic real estate concepts.  First, basic economic concepts apply to real estate.  For example, increased supply results in decreased demand, which lowers prices.  Conversely decreased supply results in increased demand, which increases prices.  The catch to this basic principle is that other factors such as the general state of the economy, the job market, interest rates and consumer optimism also affect prices as well as buyers and sellers desire to buy or sell homes.  With this most basic background let’s now explore some interesting trends in the market.

     First, according to The Wall Street Journal, new home sales (as opposed to previously owned homes) were at their highest level in August since May of 2008.  These sales were up 33% compared to August of last year.  Although this is clearly good news, I think we should view this in context of very low new home construction over the past few years.  Good numbers in August suggest full year totals of between 400,000 and 450,000 new home sales for all of 2014.  Although this is clearly an improvement from less than 250,000 sales a few years ago, it still falls far short of the 1 million new homes that sold at the height of the real estate boom.  Increased new home sales have left only a 4.8 month supply of new homes on the market.

     A second fact, according to RIS Media, is that prices increased for the 30^th consecutive month when compared to the previous year.  This statistic seems pretty clear.  Home prices continue to rise at what has remained a pretty steady pace.  The median price of a home nationwide is now $219,000.

   My third fact, again according to RIS Media is that in the 2^nd quarter of 2014, 950,000 homes returned to a positive equity situation, meaning that these homes are now worth more than the outstanding mortgage balance on those homes.  As you may recall, when the real estate market was adversely affected by the last recession many homes nationwide lost value and owners owed more in mortgage loans that their homes were worth.  RIS claims that as of today, 14.9% of homes nationwide are still in a negative equity situation but that represents 2 million fewer homes underwater than just a year ago.

     I think we can draw several conclusions from this data.  First, the real estate market is on sound ground and continues to improve.  Second, new home construction continues to recover.  Third, prices continue to rise slowly.  And finally inventory levels are still lower than normal and there is demand for more listings.

    All of the information in this month’s Market Watch is national data although I believe that the same trends I’ve just discussed apply locally.  As is always the case with real estate, demand and price for homes is always specific to one individual home.  Please give me a call if you would like to discuss the value of your house or the home you are considering buying. You can reach me on my cell phone 812-499-9234 or email: Rolando@RolandoTrentini.com 

If you want to do some research before we talk, the most accurate information on our local real estate market is always at FCTuckerEmge.com.