Thursday, March 28, 2013

Home Prices Rise at Fastest Pace in Over Six Years

Home-price appreciation is accelerating in much of the U.S., offering the latest confirmation that the housing market is turning after the most severe property downturn since the Great Depression.

Prices rose by 8.1% in January from a year earlier, the largest such gain in 6½ years, according to figures from the S&P/Case-Shiller index of home prices in 20 major metropolitan cities released Tuesday. All 20 cities posted annual increases.

Prices also defied their usual winter slowdown and rose 0.1% in January from December, a period when prices often fall because sales activity is slow. After adjusting for seasonal factors, prices gained 1% from December.

Housing demand is revving up at a time when the number of homes for sale has fallen to the lowest level in decades. Low mortgage rates also are helping homeowners who can qualify for a mortgage take on more debt without a big increase in their monthly payment.

Supply shortages have developed in a growing number of markets where many homeowners are either unwilling or unable to sell because they have experienced sharp price declines. And home builders, long sidelined by competition from bank-owned foreclosures, have added little new construction. Inventory also has been whittled down as investors convert homes into rental properties. When the year began, many economists and analysts expected prices to rise at a slower pace than in 2012. But the conditions that produced last year's run-up—low inventories, a growing economy, strong investor demand and low mortgage rates—are "stronger than last year, and last year was strong," according to Mike Simonsen, chief executive of Altos Research, a real-estate analytics firm based in Mountain View, Calif.

Economists at Morgan Stanley MS +0.07% now expect prices to gain 6%-8% this year, up from an earlier forecast of 4%-6%. Lawrence Yun, chief economist at the National Association of Realtors, raised his forecast to 7% from 4% because he expects inventory shortages will persist. Mr. Simonsen said those predictions could be too low and is expecting a 10% gain. The market is "crazy hot right now," he said .

Prices began rising a year ago amid strong investor appetite for foreclosed properties and other "distressed" sales. But in recent months, data have shown prices rising for homes that aren't distressed. "That suggests a more sustainable turn, and it suggests more momentum heading into 2013," said Michelle Meyer, an economist at Bank of America Merrill Lynch. She's now calling for 8% price gains this year, up from a prior estimate of 4.7%.

Consumers' expectations of future home-price gains have also picked up. Some 48% of respondents to a Fannie Mae FNMA -14.19% survey last month said they expected prices would rise over the next 12 months, while only 10% expected prices to decline—the highest margin since the survey began three years ago.

Another year of strong home prices could have powerful knock-on effects for housing markets digging out of a painful collapse. Another 10% gain in home prices would free around 4 million homeowners from being underwater on their mortgages, when they owe more than their homes are worth.

Many of the markets with the biggest gains have been those that have had strong demand from investors. Phoenix has witnessed the largest home-price gains over the year, at 23.2%. There, around 26% of home sales in December were to investors that bought more than five homes, up from 16% a year earlier, according to a CoreLogic, CLGX +0.04% a real-estate data firm. In Las Vegas, where prices rose 15.3% in January, multi-property investors accounted for 22% of sales, while Atlanta, where prices gained 13.4%, saw 24% of homes sell to multi-property investors in December.

For now, economists see few signs of a bubble because credit standards remain conservative. Even in markets that have seen large gains, prices are still in line with their long-run relationship with rents and incomes. A bigger concern is that price gains and rising rents are outpacing income growth, leaving some families "squeezed on housing costs," says Mr. Yun, of the National Association of Realtors. "It's an unhealthy development for prices to rise this fast compared to people's income growth."

 Economists see two main risks to their forecasts: a big rise in mortgage rates, or slumps in job growth or consumer confidence.

 Source: Wall Street Journal

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Finding a good real estate agent / broker

Finding a good real estate agent / broker is essential to enjoying a painless real estate transaction. The saying is "20% of the agents do 80% of the business," and it is true. The question is how can you find a good real estate agent? The best agent for you doesn't necessarily work at the largest brokerage, close the most transactions or make the most money. The best agent for you is an experienced professional who will listen to you, conduct herself in an ethical manner and knows your market.

1. REALTORS® and Real Estate Agents

All Realtors® are licensed to sell real estate as an agent or a broker but not all real estate agents are Realtors®. Only Realtors can display the Realtor® Realtors belong to the National Association of Realtors and pledge to follow the Code of Ethics, a comprehensive list containing 17 articles and underlying standards of practice, which establish levels of conduct that are higher than ordinary business practices or those required by law. Less than half of all licensees are Realtors®.

2. Referrals

Most real estate agents stay in business because satisfied clients refer them to friends, family, neighbors and coworkers. Ask the people around you who they have used and ask them to describe their experiences with this real estate agent. Successful agents make customer satisfaction their number one priority and put their customers' needs before their own. Try to find an agent who goes above and beyond her responsibilities. She'll be the agent whose praises your friends sing loudest.

3. Search Online for Agent Listings

There are plenty of Web sites that will refer agents to you but that is no assurance of quality. The agents they refer are those who have paid the Web site owners a fee to be listed in their directory. A better bet is to Google the top real estate companies in your area, go to those Web sites and look up profiles of individual agents at offices near you. Agents who are experienced will tell you but newer agents might have more time to spend with you. Look for customer testimonials.

4. Attend Open Houses

By going to open houses, you can meet real estate agents in a non-threatening working environment and interact with them. Collect business cards and make notes on them. If you're thinking about selling your home, pay attention to how the agent is showing the home. Is she polite and informative; appear knowledgeable? Does she hand out professional-looking promotional material about the home? Is she trying to sell features of the home? Or is she sitting in a corner reading a book, ignoring you?

5. Track Neighborhood Signs

Pay attention to the listing signs in your neighborhood. Make note of the day they go up and when the sold sign appears. The agent who sells listings the fastest might be better for you than the agent with the largest number of "for sale" signs. Results speak volumes.

6. Using Print Advertising

Real estate agents run real estate ads for two purposes. The first is to sell specific real estate. The second is to promote the real estate agent. Look in your local Sunday newspaper for ads in your targeted neighborhood. Then look up the Web sites of the agents who are advertising. These agents could be specialists in your neighborhood. Call and ask them about their experience.

7. Recommendations from Professionals

Ask other real estate agents for referrals. Agents are happy to refer buyers and sellers to associates, especially if the service you need is not a specialty of the agent who is referring you. Some agents specialize in residential resales while others work exclusively with new home builders. Other agents sell only commercial or investment property. Mortgage brokers are also a resource for agent referrals as many brokers have first-hand knowledge of exceptional agents. Pros tend to refer pros.