Chuck Miller, a builder and developer, says that based on his research, conversations with realtors, and with clients and potential clients, he believe the improvement in the housing market is due to a number of factors.
Data indicates that prices have bottomed out in most markets and are on the rise again, albeit slowly.
Home mortgage interest rates remain low but have been moving up on positive economic news and home buyers are beginning to believe that these low rates aren’t going to last much longer.
Unemployment figures are gradually improving, which increases buyer’s perception of job security.
Finally, because prices have begun to rise and inventories are decreasing buyers are realizing that now is a great time to buy.
David Rabinovitz, an expert in litigation management, says that like politics, all real estate is local, even if influenced by certain national factors. “For the past four years I have advised a micro real estate fund in southeast Florida, Broward County. The residential market has been improving. Translated to something a bit more tangible is that developers are selectively breaking ground on a few new projects. Newly listed institutionally-owned homes (e.g., foreclosures) hit the market and often sell well above list price and quickly, all while inventory levels appear to be at a very low level,” explains Rabinovitz. “I watch certain metrics; for example, how many listings are on Craigslist in our target price range. Eighteen months ago there were pages, now there is less than a handful. I look at how many listings are on MLS, and how active the auction listings are at the Broward County Courthouse. These metrics help guide my perception of the market.”
Rabinovitz has noticed that lenders have stopped foreclosing en masse. “Foreclosure gives the lender title and obligates the lender to start paying the monthly condo fees. Until the lender’s inventory is at a manageable level, many have realized waiting can be to their advantage. Further, lenders have finally realized a cooperative short sale is less expensive in legal fees and there is less risk the property will be stripped of essentials like cabinets, plumbing fixtures, and appliances,” he explains. “The resulting convergence of these factors is sufficiently decreased supply with sufficient upside that investors are now pressing prices upward at a pace of 20 percent plus per year. But before anyone gets too excited, a condo that sold at $250,000 at the peak and $50,000 after the bubble popped need only rise to $60,000 to generate a 20 percent gain.”
While values dropped, rental rates did not drop as hard and recovered sooner as more displaced owners entered the rental market, Rabinovitz says. “As a result, yields are attractive on a cash-on-cash basis without dependence on appreciation. As the market perceives stability and less risk, the risk premium drops, yields get lower, and price points continue a steady march upward,” he says.
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