Keller Williams Realty of Northern Colorado

Hindsight is 20/20. Hindsight affords us the opportunity to see “what really happened” versus what we thought was happening at the time. At Keller Williams Realty, we recently took time out at our annual Family Reunion to review 2009 year-end numbers for the national housing market. The data provided clarity and perspective about the market we came through and where we are going.

Five specific categories of data were explored: Home Sales, Home Prices, Inventory, Mortgage Rates and Affordability. Below are highlights from each of the 5 main categories:

Home Sales in Millions

Source: National Association of REALTORS®

• Sales increased 5% in 2009, the first annual sales gain since 2005 and the tenth highest annual activity level on record. While it was a difficult year for the housing market, it showed overall signs of improvement.
• In the 4th Quarter of 2009, an increase in sales was experienced by all states but California. In contrast, in the 4th Quarter of 2008 only 6 states saw an increase in sales.

Home Prices in Thousands

Source: National Association of REALTORS®

• The median home price declined by 12% in 2009.
• The reason for the big drop: 1st time home buyers and relatively few jumbo loans (or high-end sales). Distressed homes also accounted for 36% of total sales in 2009. Distressed properties typically sell for 15 to 20 percent less than traditional homes.
• Some good news:From 1989 to 2000, home prices grew by 3.9% on average – a sustainable trend. Then, from 2000 to 2005, home price appreciation ranged from 7% to 13% – an unsustainable trend. >>>If home prices actually grew by 4% (a sustainable trend) every year from 1989 the median home price today would be $203,105, which is approximately 17% above where we are today. This indicates that homes are currently undervalued and there is room for home prices to realistically increase in the year ahead.

Inventory Months Supply
# of months it would take to sell all of the homes on the market at the current rate of sales

Source: National Association of REALTORS®

• The housing supply is now at the lowest level in more than two and a half years.
• Stronger sales activity in the second half of the year driven by first-time buyers rushing to beat the November deadline for the tax credit helped draw down inventory of existing homes to 8.8 months in 2009.
• Both foreign and domestic real estate investors took advantage of slashed prices to scoop up properties across the country.
• Caution: While we’ll likely have another surge in the spring as home buyers take advantage of the extended and expanded tax credit, many economists and industry experts caution against the next wave of foreclosures. Causes: Resets and recasts of Opt ARM and Alt-A loans, a large percentage of which are already delinquent; Shadow inventory of foreclosed homes controlled by lending institutions that could flood the market once the moratorium. One estimate puts it at seven million (WSJ, Nov 23, “Low Housing Inventory Count Likely to Be Fleeting”); the Federal deficit will cause investors to require more returns on government’s debts, which in turn will push the cost of borrowing up.

Mortgage Rates 30-Year Fixed

Source: Freddie Mac

• Mortgage rates averaged 5.04% in 2009, an all-time low since Freddie Mac started tracking in 1971.
• Mortgage rate ranged from 4.81% to 5.59% in 2009. At the end of December, rates stood at 4.93%.
• A little perspective: In 1971, gasoline cost 40 cents/gallon, a stamp was 8 cents, turkey was 43 cents/pound, a Datsun Sports Coupe was $1,866, monthly rent was $150, the average new home price was $25,250 and the Dow Jones Average was 890….but back then you still couldn’t get a mortgage for as cheap as you can in 2009! The mortgage rate in 1971 was 7.48%.

Housing Affordability % of Income
% of a median family’s income required to make mortgage payments on a median-priced home

Source: National Association of REALTORS®

• 2009 Affordability = most favorable on record!
• Unprecedented interest rates, low mortgage rates as well as the first-time buyer tax credit continue to contribute to improving affordability conditions.

In Summary

Stabilization of the housing market is critical for economic recovery. The good news is that 2009 showed some key signs of stabilization. Please feel free to contact one of our Fort Collins real estate agents with any additional questions you have about the national real estate market or our local Fort Collins real estate market.

Source: Keller Williams Realty, Inc – Vision Speech – 2/21/2010.

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Posted By: Keller Williams Realty of Northern Colorado – Fort Collins Real Estate Agents,
specializing in Fort Collins Real Estate and Northern Colorado Real Estate
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