Spring 2013 Update:
Spring has sprung, April showers bring May flowers. How do you like the Rangers chances this year? It has been a “wet” start to the year hasn’t it? Ok then, enough small talk let’s cut to the chase.
Tyler’s real estate market has continued to stabilize and improve over the past three months. Inventory remains significantly lower (+/- 25%) than it was at this time last year, which is stimulating heightened demand in our marketplace. As far as interest rates go, we have seen a small increase in rates as recently as last week. However, it would seem that these small increases are due to larger forces at play, mainly the surging stock market, so in a way it’s still good news for the economy overall. However, there are several things that bear watching, and I will now attempt to outline those for you and illuminate how they may affect you and/or your market in the coming months.
Continued from Newsletter:
1. We have entered into a true seller’s market in most areas. Case in point: Last year I listed a nice property in the Tanglewood subdivision (southeast loop 323 near Clarkston Elementary) for $127,500. Over the course of 180 days we had literally dozens of showings but no offers, as it seemed every prospective buyer liked the house enough to look, but not enough to buy. The exasperated sellers (can you imagine showing your home 2-3 times a week every week, with two children under the age of three, without an offer!) took their home off the market, and wisely made some cosmetic updates to freshen the look up. Fast forward to today. We re-listed at a marginally reduced price ($125,500) with the updates they made, and it sold in less than a week with multiple offers for over the asking price. What a difference a few months can make! This seems to be happening more and more often, which is a reflection of the lower inventory and greater demand, and there have been more than a few buyers frustrated that they’ve lost out in bidding wars on homes that, even six months ago, may have been theirs for the taking.
However, statistically, the median sales price for the first months has actually decreased from what it was at this time last year ($154,850 > $150,500). This means that even in a seller’s market buyers are still taking advantage of excellent pricing, they just have to be quick to the draw. Eventually, I believe we’ll see the market correct itself in the form of price appreciation, but for now buyers looking to capitalize on great prices can do so, but must be prepared to face the reality that ‘sticker price’ may very well be a good value, and that they’ll likely have heightened competition, especially in the >$200,000 price point.
2. The rental market has softened somewhat. Remember how I said that if too many investors jumped into the mix we might see this happen? Well, we’re seeing it. Properties that were leased out within a matter of hours are now sitting for weeks, more and more signs are cropping up, and rental rates are softening because of that. Also, lending guidelines have continued to loosen, allowing for greater leniency for marginal credit-risk borrowers. While this does not mean that real estate investment is no longer a good idea (I still believe it is) it does mean that investors/landlords with tight profit margins may see some red months until the market corrects itself and rental rates firm up. This may happen sooner than later because…
3. The world of financing is changing. FHA financing is popular among first time home buyers due to smaller down payment requirements (minimum 3.5%) and lower credit/income thresholds. However, starting this spring the monthly premiums for these loans will increase, and starting in June mortgage insurance will be required for the life of the loan, whereas previously it was only required until the loan to value ratio on the loan was less than 80%. This increase may not be felt immediately, as it is somewhat of a ‘back-end’ charge, but coupled with the increase in rates, we are seeing money not quite as cheap as it once was. Still, it’s pretty cheap. This, as always, bears watching, as nothing can shift the dynamics of a market as quickly as financing.
4. Lastly, the new construction market continues to stagnate in most price points. The majority of new construction in our area is in high-end developments such as Oak Hollow and the Crossing, which are both doing exceedingly well. However, in many cases these do not reflect economic trends, as the clientele for these homes are more immune to the ups and downs in the economy. The dearth in new construction for first-time and move-up buyers remains interesting, as we are seeing demand for the product increase faster than the product comes available. If I were a betting man, I’d take Louisville in the finals. But the fact of the matter is that at some point, the dam will burst and we will see new construction take off in a big way. The only question is who will seize the opportunity.
These are the facts people. I don’t create them. I just relay them to you, my loyal customers, clients, and colleagues. And, as always, it is my pleasure to do so. However, keep in mind that these little pearls of wisdom I lay out before you are just enough knowledge to get yourself into, as the bard says, “a whole heap ‘o trouble”, so be sure that before you engage in your next real estate transaction you consult your local professional for dedicated service and excellent results.
Until then, enjoy the flowers, the warm weather and the abundant sunshine. Over ‘n out.
Real Edge Real Estate