An upward POP in Pending Home Sales as Prices settle!!
The Pierce County Housing Market saw an uptick in Pending sales last month setting the stage for a strong finish to a year that has been a big relief to many homeowners and brokers throughout the area. Let's look at the key "Year over Year" numbers:
1. Inventory – Basically Even up 0.5%
2. Closings – UP modest 3.1%
3. Months of Inventory – Even at 3.9 – Was 4.0 one year ago.
4. Median Price – UP 10%
5. New Pending Contracts – UP 11.9%
The jump in Pending Contracts is encouraging because it comes at a time typically regarded as the beginning of a seasonal drop in activity. At 1,164 Pending Contracts, it was most activity we have seen in a single month since May earlier this year! It's likely some of the extra activity was a bounce from the government shutdown ending, but a nearly 12% pop is welcome and shows us this market still has a foundation with solid demand.
Pricing has Calmed Down. This is a positive trend for maintaining housing demand and keeps affordability from eroding. At $220,000 median closed price, we are down month over month for the 3rd month in a row and we are 5% below the 2013 peak seen in July and August. The moderation helps Pierce County buyers and sellers feel more comfortable with their decisions to buy and sell. A balanced market puts both camps at ease; it allows the participants to make decisions while "breathing through their nose" and not feeling frantic.
Interest Rates Bouncing of 4% Floor. Last month we observed how just the hint of Federal Reserve tapering bond purchases had pushed rates up a full point earlier in the year. When they announced "not yet" in September, we saw rates fall back to 1st quarter levels as the chart below demonstrates. Few economists, traders, mortgage brokers or cab drivers believe this phenomenon can go on too much longer. Nobody knows for sure, but all agree at some point in the (possibly near) future rates move higher. Most people include a mortgage in their home buying, so when rates go up the "cost" of housing goes up. The thought here of course is that if there is a mortgage involved in the next move, "sooner is probably better than later".
Home Price Expectation Survey. A nationwide panel of over one hundred economists, real estate experts and investment & market strategists have issued their 2013 4Q report. The aggregate of all projections expect cumulative appreciation to be 28% by year 2018. The panel suggests 2014 will see appreciation of 4.3%, significantly slower than the 2013 pace, and returning to a balanced 3.4% – 3.6% in years 2015 – 2018. These projections of course will differ for our more localized Pierce County Market but the data is worth noting because it is not just one economist or real estate professional but an average taken from a much larger group of experts. As these appreciation numbers play out we will see real estate continues to be one of the best long term investments to participate in. The chart below shows the national return on real estate over the last 13 years. Even with the run up and painful correction taken into consideration real estate proves to be one of best long term places to invest.