Real Estate Market Update January 2014

Historians have argued for years as to why we bother giving our children middle names. There are two schools of thought. First, it could be because we aren’t good at picking names that our children like (i.e. Apple), so we want to give them a “back up” name just in case. But the second and more likely reason is that the middle name commands obedience. No matter how stern the mother's voice, the child who is pushing others off the slide at the park will usually ignore “Simon Jones, you stop that right now!” However, “Simon Quincy Jones!” will cause him to simultaneously stop pushing children, pick up those he has pushed already, brush the dirt from their clothes, defy the laws of physics as he flies to his mother’s side, and probably get his hair combed as well. The fact that his middle name has been uttered will cause all bad things to cease and all good things to happen. It commands his attention in the way that plain old “Simon Jones” never could.

That’s what happened to the Real Estate market this last year. We had a strong 2012, but the proceeding years were so bad that not everyone got the message. People continued to push other kids off the slide: “houses aren’t selling,” “everyone’s in foreclosure,” “there aren’t two good teams in the whole NFL.” This last year was so good that it was the equivalent of using our middle name. Suddenly, even people who had their head buried in the sand had to acknowledge that the market had turned around.

Let’s take a quick tour through the major indicators from 2013, and see if it gives us any insight into what we can expect in 2014.

Sales: The total number of sales rose rapidly through late winter and early spring. It reached a high during the summer and started to fall back in September. This is the normal arc in Idaho Real Estate, but the arc was so pronounced in this case that you might have seen something similar in Saint Louis..

Values: Values rose considerably. The average sales price rose by almost 17%! Try getting that out of most any other investment. In fact, the number of short sales (an indicator of how many people are underwater in their houses), fell to the point where they no longer impacted the overall market. The same is true of those dreaded foreclosures.

Inventory: With a shortage of inventory, builders and developers went crazy trying to match the demand. In spite of this, for most months of the last year, for every house that sold, less than 1.5 new houses came on the market. When you take into account cancelled and expired listings, this isn’t enough to even maintain our inventory levels.

This might all sound very promising . . . unless you remember how things sounded in 2005 and 2006. If your real estate memory goes back that far, you’re actually starting to get a little panicked. The good news can only keep rolling in for so long before there’s another crash. That’s why the slowing that we’ve felt in the last couple of months has been so welcome.

We’re not crashing, but we’re now going 60 mph on the connector instead of 75 mph on the freeway.

Days on Market & Price Negotiations: The average number of Days On Market has increased from an insane low of 32, back up to 57 which is about where it was last winter. It will still be considered a fast market though until we pull over 60 days for several months. Negotiations for existing homes followed a similar trend. At one point earlier in 2013, sellers didn’t have to negotiate more than 1% to sell their house. In December, they gave up just over 5% on average. That’s not huge, but it’s definitely more balanced.

So Mom has used your middle name and now has your attention. What does she want you to tell you?

Home Owners: You have gained a lot of value recently. If you were trapped in your house under a load of debt, that situation has likely worked itself out. You can now get out of your house and move on to the next step of your life. Many people are choosing to lock in the values they’ve gained by selling now.

Home Buyers: The market was going insanely fast for many months. It has now slowed to a manageable level and there are enough houses available at the same time for you to be able to make a good choice. There is no reason to think that things won’t pick up this spring right where they left off, so get in before you are priced out of the market.

From all of us at West Real Estate Group, we wish you a very successful 2014!