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2013 Spring Market – Forbes

Below is a great post from Forbes. It is a concise review of the four main drivers effecting the spring market nationally. Locally we are most effected by inventory shortages and increased competition… and yes, cash is still king.

Morgan Brennan, Forbes Staff

 4 Things You Need to Know About Spring 2013 Home Buying Season

Springtime is for selling houses. The months of April, May, June and July typically account for more than 40% of all housing transactions annually, in large part thanks to weather.

But unlike the painful post-bubble home buying seasons of the past several years, this year has kicked off amidst a cornucopia of experts trumpeting the U.S. housing market’s recovery. Inventory is at record lows, home prices are on the upswing and foreclosure activity has ebbed in many parts of the country. In 2012 residential real estate contributed its first positive year of gains to the overall economy since 2005, and the Federal Reserve has repeatedly called housing a “bright spot” of the economy.

The rosy recovery statistics have an increasing number of Americans feeling more confident about the prospect of buying a home.  A March survey from Fannie Mae revealed that 48% of consumers believe home prices will rise over the next year — an all-time survey high.  And another recent survey, from Prudential Real Estate, found that confidence is at a high of 69% among folks thinking about buying a home.

While promising news for aspiring sellers, it means that many of this year’s spring and summertime buyers will face a markedly different landscape than their predecessors did just a year or two ago. “In many markets around the country we have fundamentally shifted from a buyers’ market to a sellers’ market,” says Budge Huskey, chief executive of Coldwell Banker Residential Real Estate.

Inventory Shortages

“The story of the day is on the inventory front,” stresses Lawrence Yun, chief economist of the National Association of Realtors.  It’s a sentiment echoed by many.

The number of available homes has plunged to record lows, thanks to both an abnormally small supply of existing homes for sale and a dearth of new construction. Despite the fact that new residential construction is on the rise, the current annualized rate of 618,000 housing starts is still well below the 1.5 million annual starts indicative of a healthy market, according to experts. And with more than 10 million homeowners still underwater on their mortgages, many prospective sellers are holding off on listing until home prices strengthen further.

Coupled with the brisk pace of sales, there is currently 4.7-month supply of existing homes on the market (a six-month supply is considered healthy),according to the National Association of Realtors.  That’s nearly 20% less nationally that during this time last year, and in the most sought-after markets levels are down by as much as 50%, 60%.

Traditionally this time of year welcomes a jump in inventory levels as sellers time their listings with the buying season. But even an uptick in stock won’t be enough to fend off the looming shortages in some markets: “I don’t see any relief to the housing shortage. It can only come from new home construction, which will take time to come online,” says Yun.  He and other economists suspect inventory levels will remain tight throughout the rest of this year, especially since construction lending for many small- to medium-sized homebuilders remains constrained.

Increased Competition

In addition to a dwindling supply of available homes, the number of buyers has surged. And not traditional buyers. Investors have comprised a sizeable chunk of the buyer pool since the downturn and continue to do so. NAR estimates that real estate investors are responsible for about 20% of existing home sales each month.  In hard hit markets, particularly in Sun Belt states like Arizona, Nevada, California and Florida, domestic and foreign investors have been even more prevalent.

More interestingly, investors haven’t just consisted of mom-and-pop landlords and professional house flippers either. Wall Street institutions – private equity firms and hedge funds, predominantly – have allocated billions to large-scale single-family homes, snatching up distressed properties and transforming them into rentals, typically through bulk sales. Major Wall Street firms, including Blackstone and Colony Capital, have accounted for as much as 30% of sales activity in Miami, Fla., 19% of sales in Las Vegas, Nev., and 16% of sales in Phoenix, Ariz. in 2012, according to data provider CoreLogic,helping push home prices up dramatically in all three metro areas.

Investors aside, traditional consumers have been haggling over the most desirable properties — on good streets, near good schools, in move-in condition – as well. Realtors in many markets have been reporting bidding wars since late last year. “Prices are being bid up above asking price, particularly in the mid-range of the market,” says Huskey.  “In the Seattle market, for example, our agents say quality properties have been receiving six to 10 offers within the first week.”

He also notes that in areas where bidding wars have been especially prevalent, buyer tactics reminiscent of the housing bubble, for example, proffering photos of children and personal letters demonstrating why a bidder should be chosen, have begun to creep back into the marketplace.

What does this competition mean? That you the prospective buyer need to be prepared to move fast if you find a property you’d like to buy. “Buyers need to be patient because many will be outbid by others and might have to bid on multiple homes,” cautions Jed Kolko, chief economist of Trulia. “It also means thinking hard about the trade off: what you need to have in your home and what you’re willing to bend on because with tight inventory and lots of competition, it will be a temptation to take what you can get.”

Cash Is Still King

Given the steep competition, all-cash buyers who can close a deal relatively quickly offer great incentive to sellers. “Cash will still be king if there are multiple bids because from a seller’s view, they want a deal with fewer hiccups,” says Yun. About 30% of home sales are all-cash each month, according to NAR.

Over the past few years, mortgage lending has been incredibly tight – an irony given the fact that rates continue to hover near record lows. And due to the overwhelming number of foreclosures acting as comps, appraisals coming in under the agreed-upon price have steadfastly hampered many a financed deal.

The good news: LendingTree chief executive Doug Lebda says, in light of the recently unveiled new home-lending standards, lenders are slowly starting to make it slightly easier to get approved. “Lenders are reducing credit standards, allowing higher loan-to-value ratios than in the past,” says Lebda. “Nothing below the FHA and Fannie Mae and Freddie Mac guidelines, but they are underwriting closer to them.” And as home prices rise – Case-Shiller reported an 8% yearly increase in February – appraisals may begin to fall more in line with pending sales prices.

In the meantime, cold hard cash continues to hold sway in many markets, say realtors. To better compete against the speedy certainty that a stack of green promises, buyers taking out a mortgage should always get preapproval before they embark on their hunt and plan on plunking down a sizeable downpayment.

Less Distressed Deals

The good news for housing as a whole is that nationally foreclosure activity is falling. RealtyTrac reports 30 consecutive months of declines on a national level, driven largely by double-digit declines in many of the traditional foreclosure hotspots like California, Arizona, Georgia and Michigan.

Decrease in activity coupled with fierce competition from investors targeting distressed inventory means the possibility of picking up a decent fixer-upper at a discounted price from the bank has greatly narrowed. And when such a property does come to market, the discounts are much smaller than they once were. In February short sales and foreclosures comprised 25% of home sales,  down from 34% a year ago, according to NAR. And the discounts have diminished too: short sales fetched 15% discounts on average, foreclosures 18%.

“Foreclosure inventory has been somewhat picked over,” says Daren Blomquist, vice president of RealtyTrac. The largest distressed inventory increases have been among homes built prior to 1960 and/or valued below $50,000. “Finding one in a condition the buyer can work with in a decent location has become a challenge to find.”

Nonetheless real estate is local and, despite the drop in foreclosure activity nationwide, several states are actually experiencing significant increases in foreclosure starts, as lenders continue to process a backlog of defaults. This is especially true of judicial foreclosure states. “In some of the markets like Florida, New York, New Jersey, and Ohio, we have seen increases in foreclosure activity counter to the national trend,” notes Blomquist. “Many aren’t listed for sale yet so this season some of them will be will be. So from a buyer perspective there may be some more inventory in the pipeline.”

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Goode and Farmer Report – Provincetown, Truro, Wellfleet April 2013

Provincetown Truro and Wellfleet First Quarter Figures 2013

Coming off a banner year in 2012, where year-end sales surpassed industry expectations, we wouldn’t have been surprised at a more “normal” first quarter of 2013. Real estate sales did slow as winter activity was moderated by weekly snowstorms more than by any changes in market fundamentals. Sales were more aligned to 2011 than to 2012.

The average sale price for a single-family home in Provincetown was up 27% to $1.021M, but the number of sales was down 25% from 12 to 9 sales. Total dollar volume was about even with 1Q2012 at $9.2M and average days on market were even as well, at 189 days.

There were 16 condo sales in the first quarter, down from 29 last year. The average sales price was $367K, which was down 8% from 2012. The decrease in condo sales was evident, as buyers were not inclined to show up on snowy weekends to shop for real estate.

The continued decrease in inventory remains a factor as the number of properties for sale continues its decline to about 25% from the same period last year. There are currently 52 single-family homes available for sale in Provincetown with an average asking price of $1.373M. There are 102 condominiums available for sale with an average asking price of $476K.

In our year-end report for 2012, we mentioned the decrease in available homes for sale were beginning to build the case for spring 2013 being an opportune time for sellers who had been sitting on the sideline, to put their property on the market. The case has been made. Mortgage rates remain at historic lows and the buyer pool is growing. This evolving supply and demand dynamic in Provincetown will be the factor to watch moving forward in 2013




Single-family home sales in Wellfleet and Truro were strong in the first quarter. In Truro, sales increased by 27% from 11 to 14. The average sales price decreased by 21% to $617K from $785, while the median sales price increased by 3% to $613K from $595K. Total sales volume remained flat at $8.6M.

Single-family home sales in Wellfleet increased 12% from 8 units to 9 units. The average sales price increased 3% to $510K from $496K, while the median sales price slipped 18% to $395K from $482K.

First quarter sales analysis can swing wildly on the outer Cape, as the numbers are relatively small and one sale plus or minus can move the percentages in a dramatic fashion. The first quarter is just a hint of what is to come and begins to outline the narrative for the full year ahead in real estate on the outer Cape.


Truro Wellfleet


In our wrap up we are going to repeat what we said in our 2012 year-end review. Real estate is back! And while we don’t want to be accused of having “irrational exuberance,” we continue to see buyer excitement that has not been seen for years. But, buyers do need to see more choices. Sellers are becoming more confident that this is the time to sell. These positive buyer and seller attitudes and the continuation of rock-bottom mortgage rates bode extremely well for 2013!

Please call or stop in if you are considering selling or if you are just curious as to what your home is worth. Our business philosophy is that the best-informed sellers and buyers are the happiest. And, that’s what we do best.

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Goode and Farmer Report – Boston April 2013

 Lack of Inventory – Still the Challenge

The Big Number is 45%. Combined, all Boston neighborhoods saw a 45% decrease in inventory of condos for sale as of March 30 compared last year at this time.  This decrease in inventory didn’t seem to effect sales as the average sale price went up 10% to $611K vs. $556K and the number of condo sales increased 3% to 644 units from 624. The median sales price increased 4% to $416K from $400K in 2012. On first glance this real estate market seems very healthy but a continuing decrease in inventory levels could create a problem going forward.

The Back Bay saw a 1% increase in condo sales to 74 units from 73 in 2012 while the average price of a condo sold increased by 12% to $1.489M. The number of condos available for sale dropped 50% from 183 last year to only 92 today.

The South End saw an 8% increase in the number of condo sales to 85 condos sold year to date compared to 79 last year. The average price of a condo sold increased 18% to $763K compared with $646K last year. The inventory of condos for sale decreased 57% from a very low 130 last year to a terrifying 56 today.

South Boston saw a 4% decrease in the number of condo sold to 80 in compared with 83 in 2012. The average sales price of a condo increased by 8% to $444K compared with $410K in 2011. The inventory of condos for sale dropped 49% from 154 in 2012 to 79 condos for sale today.

This market is so resilient and so desirable that declining inventory levels have not negatively affected the steady increase in sales and prices, although these increases have slowed somewhat. Spring will tell just how resilient the market is to very low inventory.


Boston Q1

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Big Leap In Spring Sales

South End Heli ShotMarket resilience to low invent0ry levels is surprising, but as Scott reports sales continue to increase.

Posted by Scott Van Voorhis  April 9, 2013 06:44 AM

Will dwindling listings derail the real estate recovery?

At least for now, the answer is no.

The number of pending sales across the state jumped 4.6 percent in March compared to the same time last year, the Massachusetts Association of Realtors reports.

In fact, the 4,308 homes put under agreement was the best showing since March 2005, at the height of the real estate bubble, when buyers laid claim to 4,404 homes.

That’s just a percentage or two difference.

Pending condo sales also took a big jump in March, surging 9.4 percent to 1,888.

Given the number of homes and condos for sale is down roughly a quarter from this time in 2012, buyers are clearly biting the bullet and taking the plunge anyway.

There’s certainly anecdotal evidence of homes that couldn’t sell last year being put on the market and getting offers now.

Buyers are looking past flaws that might have been deal breakers before and likely paying more as well.

And there’s some hard evidence as well.

Home prices in Greater Boston moved up 10.6 percent in February, slightly above the national average, the Boston Business Journal notes in this post on the latest CoreLogic report.

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Demand For Vacation Homes On Rise – NAR


781 boardwalk

More consumers are seeking the relaxation of getting away, as vacation-home sales rose 10.1% to 553,000 in 2012 from 502,000 in 2011, according to data from the National Association of Realtors.

When surveyed, buyers listed a number of reasons for purchasing a vacation home: 80% plan to utilize the property for vacations or family retreats, 27% intend to use it as a primary residence in the future, 23% hope to rent it to others and 23% saw the home as a good investment opportunity.

Conversely, investment-home sales dropped 2.1% to 1.21 million last year from 1.23 million in 2011. However, investment-home sales lingered well under a million during the market downturn, according to NAR.

Vacation-home sales equaled 11% of total transactions in 2012, which remained unchanged from 2011. The portion of investment sales, on the other hand, totaled only 24% in 2012, down from 27% in 2011.

“We had a strong stock market recovery, which helps more people in the prime ages for buying vacation homes. Attractively priced recreational property is also a big draw,” said NAR Chief Economist Lawrence Yun.

With the buzz of an investor-driven housing recovery going around, Yun agrees that investor presence continues to thrive.

“Investors have been very active in the market over the past two years, attracted mostly by discounted foreclosures that could be quickly turned into profitable rentals,” Yun said. “With rising prices and limited inventory, notably in the low price ranges, investors are likely to step back in coming years.”

In 2012, the median investment-home price was $115,000, a 15% jump from $100,000 in 2011. Median vacation-home prices saw an even greater increase, hitting $150,000 compared with $121,300 in 2011. This represents a greater number of more expensive recreational property sales in 2012, NAR notes.

In 2012 the median price for a condo sold in Provincetown was $399K, up 11% from 2011.  The median price for a single family home sold was $800K, up 40% from 2011. 

Investment-home buyers had a median age of 45, earned $85,700 and purchased a home that was considerably close to their primary residence. Of the investment buyers, 35% purchased more than one property.

“Property flipping modestly increased in in 2012,” Yun said. “However, this isn’t flipping in the sense of what took place during the housing boom. Rather, investors generally are renovating and improving properties before placing them back on the market to resell at a profit.”

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Why Is Inventory So Low?

Excerpts taken from a great post by Mike Simonsen of Altos Research.

 Three Reasons Why Housing Inventory is So Low


There’s no question about it, the operative theme of the 2013 housing market isrestricted supply. Ever since the bubble burst in 2006, we’ve been hearing about the dangers of over supply, of the massive “shadow inventory” out there. Yet we’re living in a vastly different reality. There are 40% fewer homes on the market now than there have been during February in the last few years.

Percent of homes with Price ReductionsInventory of actively for sale homes. Single Family Homes. Altos 20-city (national) composite. Data as of February 22, 2013. Source: Altos Research

Mid-January typically marks the seasonal low of available housing inventory. The fewest homes are on the market after the holidays. But pretty quickly they start coming on the market to prepare for spring. Inventory gets added until the first week of July, when people start looking forward to the Autumn.

Last week we commented about the rising prices that have resulted from this restricted supply. Imagine what would happen to the price of oil if Saudi Arabia, Russia, The US, China, Iran, and Canada were all offline.  It’s a, ahem, crude analogy, because housing is less a commodity than oil. But the fact is, we’re facing unprecedented few homes available for sale.

Why is that? What happened to all this “Shadow Inventory” that was going to dump on to the market?

You can boil the low-inventory reality down to three primary factors:


Since 2007, new housing starts have been anemic. The long-term average construction rates are about 1.5MM homes per year. In the last six years, we’ve averaged well under 1MM. And since 2009, the average is closer to 500,000. Meanwhile population and household formation keeps on trucking. The over-construction that happened in the bubble is a distant memory. See the chart to the right. Construction volume under the orange line are “undersupplied” conditions. The homebuilders imploded so profoundly after the bubble, that we haven’t had this few new homes being built since 1959.

Expect this trend to continue for several more years. It’s difficult to ramp up housing production quickly. And we’re a long way below normal.

Percent of homes with Price ReductionsInventory of actively for sale homes. Single Family Homes. Altos 20-city (national) composite. Data as of January, 2013. Source Census Bureau

2-The Reverse Shadow Inventory Dynamic

Rising home prices have led to fewer, not more, existing  homes coming on the market. You might call this, ironically, the “Reverse Shadow Inventory” dynamic.

When the Shadow Inventory meme emerged during the bubble, the bearish argument followed: As soon as home price tick back up, there are going to be millions of people (and banks) who want to unload. Therefore supply will rise and prices will fall again.

In actuality, it seems the psychology has been reversed: As prices have climbed, those who (still) own their underwater homes finally see light at the end of the tunnel. The longer they hold, the closer they are to recovery. Why sell now if you don’t have to? Maybe you’ll make it out alive!

Banks are acting similarly. The owners of underwater mortgages have no incentive to unload quickly. Their assets are appreciating. Furthermore, as home prices increase, fewer and fewer people are at risk of default. The Shadow is shrinking in the noon-day sunshine of rapidly re-inflating home values.

3-Government Policy

Finally, it is no coincidence that essentially all housing policy, all programs, laws, and incentives have been focused on stimulating demand and restricting supply. The Fed is aggressively keeping interest rates low. HARP, HAMP and related mortgage crisis programs are designed to keep people in their homes. They have been successful. Politically, it’s near impossible to institute a program that might help home buyers. For whatever reason, the bureaucrats are much more fond of home owners. That’s unlikely to change.

We’re in a hangover of short supply after the burst bubble. Low new construction, low incentive for existing homes to sell, and a government that wants people to stay put. Like a good hangover, these are long, slow, painful conditions.  We’ll ease slowly out of the fog in the next few seasonal cycles.

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February MAR Report

 The Massachusetts Association of REALTORS® (MAR) reported today that February pending home sales were positive for the 22nd straight month compared to the year before, but winter weather kept gains modest. Pending sales figures (also called homes under agreement) are a leading indicator of actual housing sales in Massachusetts for the following 2-3 months.

“While we were still in positive territory, the combination of low inventory and several weekends snow storms, including a blizzard, kept buyer activity relatively minimal in February,” said 2013 MAR President-Elect Peter Ruffini, regional vice president at Jack Conway REALTORS® in Norwell. “After a ‘non-winter’ in 2012, the fact that pending home sales were still up in February is a good sign for the market.”
The number of single-family homes put under agreement in February was up 1.1 percent compared to the same time last year (3,041 homes in 2012 to 3,075 homes in 2013). This is the 22 nd straight month of year-over-year increases. On a month-to-month basis, single-family homes put under agreement were flat compared to 3,076 homes put under agreement in January 2013.
The number of condos put under agreement in February was up 11.9 percent compared to February 2012 (1,146 units in 2012 to 1,282 units in 2013). This is the 22nd straight month of year-over-year increases. On a month-to-month basis, condos put under agreement went UP 5 percent from 1,216 units in January 2013.