April 2012 By Jeffrey S. Detwiler President and Chief Operating Officer of The Long & Foster® Companies Green Sprouts in the Economy and in Real Estate Could the headlines cause you to miss a lifetime opportunity? Investing in the housing market was once practically a no A recent Associated Press survey of leading economists points brainer. Through the downturn, however, many of the fixed out that experts believe the unemployment rate will fall from its assumptions about housing — that property values would current level to 8 percent by this fall, and will likely dip even more always rise and equity would naturally grow — became variable, by the end of 2013. leaving many consumers questioning the extent to which the real estate market was a good investment option for them, or if now Since last summer, the U.S. Labor Department reports that was the time to purchase that new home they have always wanted. employers have added more than 1 million workers to their It also opened the door to years of negative housing headlines in rosters. The economy is showing green sprouts in other areas the media, some of which continue today. as well — industrial output jumped in the early part of the year, car sales are booming and many experts agree that the housing The reality, however, is that the indicators we examine to market, in many parts of the country, has turned the corner. determine the health of the housing market are gaining momentum. The employment picture is improving, consumer HOME PRICES ARE RISING IN SOME AREAS confidence is increasing, mortgage rates are low and home prices in much of the Mid-Atlantic region have stabilized. Most of the time, when we read headlines about sinking home These conditions may add up to opportunity, which is why so values, we’re absorbing national numbers that incorporate many qualified buyers, sellers and the hardest-hit markets in the investors are looking to evaluate their country. The reality is that home own equations in the context of the prices in many areas of the Mid-Atlantic market as it exists right now. region have seen prices stabilize — and even increase in some areas. Still, we’re finding that although the recovery is well under way in To get a clear picture of home prices many regions, the mainstream in your market, it’s best to evaluate media has been somewhat slow local-level data. At Long & Foster, in reporting the full story. A home we believe that better market data purchase for most of us is, first and results in better buying and selling foremost, a place to live, raise a family decisions, which is why we provide and be part of a community. But it’s also an investment that requires hundreds of publicly-available reports each month to take housing careful consideration as it offers an opportunity to build long-term data down to county and neighborhood levels. A professional equity. Being able to read between the headlines may present a Realtor® can provide a detailed assessment for your home or one homeownership opportunity unlike any we have seen for you are considering buying. generations, so it’s important to recognize the headlines that support the green sprouts we’re experiencing in the economy and INVENTORY IS AT MULTI-YEAR LOWS in the housing market. Throughout much of the Mid-Atlantic region, buyers who have perceptions of the housing market based on national THE ECONOMY IS GROWING headlines and reports are finding themselves facing In the early months of the year, we’ve seen consumer confidence an unanticipated situation — a narrow selection of gain strength and reach levels we haven’t seen for some time. inventory from which to choose. All of the major Improvement in the job market is the primary driver in boosting housing markets in the Mid-Atlantic are currently experiencing consumer confidence, and we’re likely to see an upward trend as lower inventory levels than we’ve seen in at least two years — companies continue to expand and add more people to the payroll. longer in some markets.
Jeffrey S. Detwiler is president and chief operating officer of The Long & Foster Companies, the parent company of the largest independent residential real estate company in the United States, Long & Foster® Real Estate, Inc. The group of companies is the Mid-Atlantic region’s leading provider of homeownership services. In addition to its real estate arm, The Long & Foster® Companies consist of Prosperity Mortgage® Company; Long & Foster® Insurance; and Long & Foster® Settlement Services. The total 2011 sales volume and sales equivalents for all The Long & Foster Companies was in excess of $42.7 billion. Visit longandfoster.com for more information and complimentary industry-leading market data.For people who have been putting off selling their homes for an THE HOUSING RECOVERY IS HAPPENING NOWopportunity to move up to a bigger or nicer house, the current The headlines pertaining to housing in the last few years havesituation may present a good reason to reevaluate their options. left many consumers justifiably concerned about making aCurrently, many sellers can offer their homes to willing buyers homeownership decision. But as we’re seeing today, by the timein the market and move up to homes while prices are still the media begins to consistently report on the green sprouts inmoderate, but this window of opportunity may be quickly closing the economy, the recovery is well underway and that could causeas the recovery takes a firm hold. many to miss an opportunity. The fact that cash transactions are elevated signals higher activity by investors indicating they believeRATES WILL NOT STAY THIS LOW FOREVER the current environment is a buying opportunity.Another window of opportunity that may be closing pertainsto historically-low interest rates. Headlines in the media haveannounced for some time that rates remain at record lows. Someheadlines infer that potential buyers or homeowners who wish torefinance have plenty of time to make a decision to take action sincerates have held steady for some time. The reality, however, is thatmortgage rates are expected to start a slow and steady climbupward in the not-too-distant future.According to the Mortgage Bankers Association, 30-yearfixed mortgage rates are expected to increase through thesecond half of this year, throughout 2013 and beyond. Theopportunity to purchase or refinance at today’s low rates may notlast much longer. Consider that, on a $300,000 mortgage, just Buyers, sellers and investors in today’s marketplace understand the value that comes with working with the best-trained and best-equipped real estate professionals. Getting local facts and exploring your personal homeownership goals with a professional will help you identify an opportunity that you may not find by scanning national headlines. Like many housing experts, I agree that we are likely to look back at today’s market in a few short years and recognize the historic opportunity available at this time to qualified buyers and sellers.a 1 percent increase in the rate increases the monthly payment bymore than $200 a month. That adds up to more than $70,000 ininterest expense alone over the life of a 30-year mortgage.OWNING A HOME IS AFFORDABLEAs 2011 came to a close, the National Association of Realtors®Housing Affordability Index showed that housing affordabilityrose to record highs, with the index reaching the highest levelin its 20-year history. What this means is that a home buyer’spurchasing power is greater now than it has been in recenthistory. Low mortgage rates coupled with moderated housingprices and stabilized household incomes present affordabilityconditions unlike any we’ve seen in generations.