The Nations's Summer Sales Outlook: Expect the Unexpected
The state of American real estate is, right now, basically an entirely new state. The conditions making this market are so extremely opposite, and have such opposing ramifications, experts find themselves without firm precedence to make predictions.
Industry professionals, struggling to define the current national market, call it “bifurcated.” The term refers to the two extremes of a healthy high-end market (in which, for example, New York City closes 16 deals worth $10 million or more in the first quarter of 2012) balanced by the other end of the spectrum, where distressed property activity has increased. And there’s actually a third aspect to consider: historically low inventory of market rate homes. The dearth of available properties causes bidding wars, the likes of which are making news across the country. So perhaps what we really have is a “trifurcated” market—at the very least.
What Will Influence the Summer Sales Outlook?
There are too many factors that influence sales in every part of the country to explore them all, but in keeping with our theme of three, we've identified three major players that will change the game this summer.
- Short Sales
One factor to watch this summer is the impact of short sales. According to Real Estate Insider News, short sale transactions are poised to overtake foreclosures. “Short sales of U.S. homes rose to a three-year high in the first quarter as banks agreed to let more borrowers unload property at a loss, putting the transactions on pace to surpass deals for foreclosures.” Data from RealtyTrac Inc. confirms this: RealtyTrac’s Daren Blomquist speculates that “By next quarter nationwide, we’re actually going to see the number of pre-foreclosure sales outnumbering bank-owned sales…..“It’s a paradigm shift in the way lenders are dealing with their distressed loans.”
- Shadow Inventory
In May of this year, S&P Rating Services released reports that based on first quarter data, it could take up to 46 months to clear the market’s supply of distressed homes. These homes aren’t currently on the market, but are being held by banks for various reasons (such as waiting for better prices, or attempting not to flood the market and depress prices). This “shadow inventory” must affect summer sales in some way, but exactly in what way, we can’t be sure. If the release of such properties is slow and steady, they should be absorbed into the market without too much disruption. And if short-sales are taking place in more streamlined, successful transactions, the market may be ready to handle the onslaught.
On the other hand, a wave of low priced homes can indeed serve to depress home prices, and could hurt the progress certain parts of the country have lately enjoyed, if large numbers of distressed properties flood those local markets.
- The Magic Combination: Low Interest, Low Prices, Low Inventory
In many parts of the country, the magic three have turned buyer’s markets into seller’s ones. And as long as these factors remain in place, we can expect more bidding wars and prices creeping upward in response. However, if enough sellers get their heads turned by favorable conditions for selling and thus increase the number of homes for sale, or if prices creep up too high, the magic combo could lose some of its magic.
Essentially, every summer day will be a new one in 2012, with fresh twists and turns in this turbulent, exciting, one-of-a-kind national market. One prediction we’re sure of: Local Realtors® will be more important than ever in helping us stay on top of the latest trends.
Anna Marie Erwert writes from both the renter and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends, specializing in the San Francisco Bay Area and Pacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert.