Inventory and Interest Rates Should Inspire Action Among Sellers and Buyers This Fall
The robo-signing scandal that rocked the real estate industry at the end of 2010 was one more black mark on the U.S. housing market. But in retrospect, it may wind up being the best thing that happened to home sellers this year.
That’s because the resulting foreclosure moratorium kept hundreds of thousands of bank-owned properties off the market (thousands in the Chicago area alone) allowing inventories to fall throughout the year and alleviating some of the downward pressure on prices. In fact, a common, though somewhat unexpected, complaint from homebuyers in certain neighborhoods this year was that there just weren’t that many quality choices.
However, it now appears that the nation’s largest banks have addressed their processing problems, and the foreclosure market is ramping up again. According to Irvine, Calif.-based RealtyTrac, default notices rose 33% from July to August and were at their highest level in nine months. The 33% jump was the biggest single-month increase in default notices in four years.
The silver lining for sellers is that the increase in bank activity is focused on the early stages of foreclosures. Bank repossessions were actually down in August according to RealtyTrac. So there may be some time before this new wave of foreclosures works its way into the resale market.
Still with storm clouds potentially gathering, right now could be the best opportunity for the foreseeable future for sellers to make a deal. In the city of Chicago, Months Supply of Inventory (MSI) registered 7.4 months for September, its lowest level in more than two years. And more buyers can afford your home with 30-year conforming mortgage rates at a mouth-watering 4%. While sales rates typically slow in the fall and winter causing MSI to rise, the looming foreclosure inventory could throw off the curve and lead to an oversupply in certain markets next spring. Therefore, our advice to sellers this fall is to get your home in tip-top shape, price it in line with the market, and allow @properties’ comprehensive marketing programs to generate maximum exposure.
A note to buyers: We have gotten so used to low mortgage interest rates that the 4% rates we’re seeing today barely make headlines. Rates actually dipped as low as 3.75% late last month, and sub-4 rates have been popping up now and again into early October. Don’t get caught napping. Today’s rates are a huge deal, especially when coupled with lower home prices. Meanwhile, apartment rents continue to shoot up. Class A rents downtown are up over 15% during the last two years, and are expected to climb even higher. Whatever the future holds for home prices, the day-to-day economics of own vs. rent are looking more and more attractive to buyers.
Remember, you don’t have to be buying or selling a home today to contact me with questions about the real estate market. I’m available to talk anytime, and I always welcome your referrals.