The market is actually improving and has done better in November and December than the previous year. January is off to a better start than last year. Inventories are the lowest they’ve been in almost 5 ½ years. Bank owned properties still make up about 1% of the market and short sales are about 5%, but these homes make up a significantly larger share of the sales. The biggest thing holding back the market is not jobs but the inability of 1,000’s of potential buyers selling their existing homes without having to write a $20,000 to $100,000 check at closing because they owe more than their home is worth, its called “house lock”. Also 1st time homebuyers are not as prevalent because they can’t find good paying jobs. This is a problem that is virtually unresolvable.
Here’s what’s happening.
1) If your house is being chased by the market then it won’t sell. The dilemma is as the Spring Market comes upon us it is better to wait. Inventories are low now and in a month or two they will rise 10%. So it’s better to position your house and have it be chased now or wait.
2) Housing affordability is at 190.8, in 2007 it was 115.4. That’s not the problem.
3) Mortgage rates are at 3.75%. In 2005 they were mid 6.25%. That’s not the problem.
4) 1 out of 3 sales is to an investor.
5) Inventories are down 5.5% from last January.
6) Thirty-nine percent of people say they will work past 70 or simply never retire, according to the annual survey from the Transamerica Center for Retirement Studies, a nonprofit private foundation. Fifty-four percent of those surveyed said they plan to retire between age 60 and 69 and 6% said they will retire between age 50-59.
7) 1000’s of building lots on the market equaling a 64 month supply.
8) The median building lot sold for $99,000 in January.
9) Getting a house under contract is actually the easy party. Getting the house to settlement is the hardest its ever been in my 32 years in the business. The appraisal, mortgage company, home inspection, title issues and demanding buyers make who you choose as your agent more important than ever.
10) The surprisingly long time period required to bring the housing market back into balance also carries significant implications for the overall economy and should serve as the rallying call to policy makers to develop policies to help accelerate the recovery process. Some of the more important implication s for the drawn out recovery process are that resources are likely to continue to flow out of the homebuilding sector and that more households are likely to remain renters for longer periods of time than what we have seen in recent years. The apartment market is already benefitting from this trend, and homebuilders and firms that produce and sell household items, such as building products, household furnishings and furniture are suffering. Many of these businesses’ will need to reposition their business models to serve and benefit from a larger pool of renters and a smaller pool of homeowners.
Policymakers will need to take a hard look at ways to clarify and speed up the drawdown of vacant homes on the market and those homes that are hanging over them market. There has been talk of selling large blocks of foreclosed homes held by Fannie Mae and Freddie Mac to investors under the stipulation that these homes would then be placed for rent. Such moves would have a positive effect on appraisals and mortgage underwriting, as they would remove some questions as to how much vacant and for-sale inventory is currently hanging over the market. Other policies aimed at addressing some of the issues surrounding the large number of homeowners with negative equity could also provide a lift to housing turnover and help speed up the recovery process.
11) In the fourth quarter 2011, the national homeownership rate declined from the previous quarter to 66.0 percent. The national homeownership rate fell back to near multi-year lows to end the year after rebounding slightly from its lowest levels since the first quarter of 1998 in the third quarter. The national homeownership rate has declined in four out of the past five quarters. The homeownership rate is lower compared to this time last year when it stood at 66.5%.
12) Posted by Philadelphia Fed President and CEO Charles Plosser: “On the housing front, I expect to see stabilization but not much improvement in 2012. We entered the Great Recession over-invested in residential real estate, and we are not likely to see a housing recovery until the surplus inventory of foreclose and distressed properties declines.
“Even as the economy rebalances, we should not seek, nor should we expect housing and related sectors to return to those pre-recession highs. Those highs were unsustainable, and the housing crash that ensued destroyed a great deal of wealth for consumers and the economy as a whole.
“The losses are real and the consequences severe for many individuals and many businesses. Moreover monetary policy cannot paper over these losses, nor should it try to do so. Households and businesses nevertheless continue to make progress on restoring the health of their balance sheets by paying down debt and increasing savings. Most economists, including me, believe that this process will continue into 2012.”
The good news is, as least for Pennsylvania and Delaware, is that the unemployment rate remains below the national average, Pennsylvania’s rate is 7.6 percent; Delaware’s is 7.4 percent, Plosser said
13) 
While pending/under contract sales are improving these “house lock” situations may take years to correct. Inventories are down from one year ago but there are still many sellers who wait to buy but can’t because their home is worth less than the mortgage. However, houses are selling if put in a position for the buyers to chase the house. Proper pricing, marketing and negotiating are extremely important to get the sale. Experience and knowledge are needed to get the sale to the settlement. The most important thing is what happens after the agreement is signed and getting the house to settlement.
While there are 1,000’s of sales in our market each month 100’s of those sales never get to the settlement table. From now until Memorial Day we will see more sales than we’ve seen in a few years, and if you are able to sell your house and you have stable employment it’s an excellent time to purchase. Housing will improve when more sellers can get out of “house lock”, but it will take time.