Nevada City Virtual Tour

Monday, February 18, 2013

You Will Kick Yourself If You Don't Buy a Home Now and WHY

You Will Kick Yourself If You Don't Buy a Home Now: Ivy Zelman

 Household formation and the lack of inventory are factors that are driving a strong recovery in home prices.

"We have in our country what others don't have -- a growing population," she said. Zelman forecasts the U.S. population will rise 8% by 2020. Together with legal immigration and the "de-coupling" of households as young adults move out of their parents' homes, the number of households is projected to rise by 11% in the next decade.
Meanwhile, demand at multiple listing services (MLS) and trustee sales is outstripping supply.
"We have no inventory and growing households," she said. "We need more inventory."
Zelman also notes that the new-home market, which has been at an "anemic level," has a "big opportunity for a comeback." Previously, buyers looking for new homes were able to find relatively new properties in the existing-home market. Now that foreclosure inventory is being flushed out, buyers who still want new homes will be looking to homebuilders to ramp up production.
Those who don't agree with Zelman point to the fact that demand in the past year has been driven by yield-hungry investors such as Blackstone and Colony Homes snapping up foreclosure property to convert into rentals. But concerns that demand might dry up once yields fall are overdone, Zelman says.
The analyst notes that even if investors pump in all the money they have raised in the real estate market, they will at most buy 100,000 units, which barely makes a dent on the for-sale market. Meanwhile, in a rising market, traditional homebuyers will be encouraged to buy.
Concerns over shadow inventory -- homes that are in the process of foreclosure that are yet to hit the market -- has also abated.
Zelman estimates shadow inventory at 3 million homes and believes that not all of them will hit the market at once. For one, in judicial foreclosure states, it takes anywhere between two to three years on an average for a foreclosure to be completed.
Second, lenders face considerable challenges in evicting borrowers as they deal with new protection laws in states such as California and Nevada.
The bottom line is, the rise in home prices appears to be sustainable and there is now considerable momentum in the market. "When home prices go in one direction, it tends to go in that direction for five to six years," Zelman said.
We expect housing starts to double by 2014 and prices to rise 5% in the coming year.
"Affordability in home prices has never been better," she said. "You will kick yourself if you do not buy a house."

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