From the Star Ledger:
Are we at the bottom of the housing market?
It’s the primary question on the minds of real estate agents and analysts. Have we hit bottom yet? Are we close? Or are we rebounding by now? It could be months or years before the numbers from home sales and prices prove any conclusion, but by that time the buyer-friendly market could be shifting back to the sellers’ favor, experts said.
“My read is, several years from now we’ll look back at 2012 as having been one of those rare homebuying opportunities that comes along once or twice in a generation,” said Jeffrey Otteau, a real estate analyst and president of Otteau Valuation Group in East Brunswick.
Prices and interest rates are low, and job creation is starting to look more positive, he said. Home sales could regain their footing somewhere around mid-2012 and begin to build from there, he said.
“The buyers’ lament will be, ‘I wish I had bought then,’ ” Otteau said. “By then, those buyers will be looking at higher prices and higher interest rates for the same houses.”
Various economic indicators released in recent weeks show a housing market that will face a bumpy recovery.
All the figures are making buyers wonder when is a good time to make a move.
“Buyers face this dilemma of ‘how long do I wait,’ and if they think prices are going down, ‘do I wait at all?’” said Gary Large, president of New Jersey Association of Realtors and branch manager of Prudential New Jersey Properties in Morristown.
“Trying to time the market,” Large said, “is very difficult and not a wise strategy.”
From a buyer’s perspective, that means understanding that “cheaper is not always better,” Otteau said. Houses listed at a bargain price will not hold their value as long as or rise as quickly as those that are near employment centers or transportation corridors, and the buyer will end up paying the difference in gas and commuting costs.
The trick to sell, industry leaders said, is to price a house properly. If the listing price is too high, offers could come in significantly lower or the house could stay on the market so long buyers think something is amiss.
“Sellers really have to be aggressive to get their homes sold,” Large said. “The buyers have so much information at their fingertips that they can spot an overpriced listing a mile away, and so they don’t want to look at it.”
Recovery will happen once buyers are confident again and decide that prices won’t drop any further, experts said.
That could happen as soon as mid-2012, and appreciation could start — slowly — by 2013.
“That’s really why people are on the sidelines,” Otteau said. “Prices have corrected, interest rates are cheap, job security is better than it was, but now the next question is, ‘Is the value of this asset going to go lower?’’”
“And by the time the public gets comfortable with that,” he added, “prices will have already started rising.”
I’m not sure if it’s that usual New Year’s Eve optimism evoked by the generic philosophy that the grass is always greener on the other side of the calendar year, or perhaps the emotional need to dig ourselves out of what has surely been one of the more lugubrious periods in the U.S. economy, but there is some hope in housing.
A few positive readings in home sales and housing starts recently, topped off by today’s 7.4 percent monthly jump in contracts to buy existing homes, are fueling what I dare say is a spark, albeit not a fire. They are also managing to trump what was a particularly opposing reading in home prices from the number crunchers at S&P/Case-Shiller this week.
Then there is a big story in the Wall Street Journal today of hedge funds putting their money back in housing, suggesting that while the numbers aren’t all there for a big win, these funds are usually ahead of big market shifts, so the housing surge must be on its way. I’ve spoken to some of these hedge fund types as well, and they seem to be playing on the surging rental market for now, getting the bargains but not expecting any big “flipping” returns any time soon.
“Bottom line, whether due to even lower prices, historically low mortgage rates, falling inventory and a better tone to the labor market or a combination of all, the housing market is showing signs of stabilizing,” says Peter Boockvar at Miller Tabak. “I say stabilize instead of bottom, as its too early to make that claim just yet with still a huge amount of foreclosures that hasn’t worked its way through the judicial system and prices that haven’t likely stopped going down as a result.”
It’s all relative. Are things getting a bit better? Probably. I heard (or read…can’t remember) someone today say that housing has gone from a negative to a nothing for the U.S. economy. So when we tout and rave about today’s pending home sales numbers, we mustn’t forget where we’ve been:
“It’s not going to keep 2011 from being the worst on record for new home sales, for single family permits and single family housing starts. Next year is going to be better, but that’s not saying much because this has been the worst year, probably since 1945,” said IHS Global Insight’s Patrick Newport. In other words, housing ain’t exactly fecund, but it’s at least inching off life support.