Tuesday, March 19, 2013

Housing Is Recovering So Quickly, Might the Federal Reserve Raise Rates?

[Published Mar. 21, 2013, in the Denver Post and in five Jefferson County weekly newspapers]

First, let’s look at some market statistics.  No doubt you’ve heard — and maybe experienced — that homes started selling like hot cakes in January. This hot streak is still in evidence, with multiple offers on many listings driving up prices above what you’d think homes could appraise for. 

You’ve also heard that the average “days on market” is falling, but it’s actually falling faster than the statistics would indicate, because the average days on market is inflated by the number of houses that have been on the market for a long time but are suddenly selling.

For a more accurate picture of this turn-around, look at the days on market statistic for just those homes that have gone on the market since the first of the year:

About 60% of the homes listed and sold since Jan. 1st went under contract in 7 days or less. Roughly the same percentage of those that haven’t yet closed also went under contract in 7 days or less.  The average is 10 days on market.

But if you include all homes that closed in the last 30 days, the average is 81 days on market because of all those old listings that weren’t selling — until now.  My statistical analysis included only central Jeffco listings but the same dynamic is at work throughout the metro area.

The Federal Reserve, which has kept interest rates exceptionally low to spur the real estate market — which it considers essential to economic recovery as a whole — surely must be noticing this runaway market and reassessing its policies. I wouldn’t be surprised if interest rates will soon be allowed to rise more quickly than planned just a few months ago.

Once buyers get the feeling that the Fed is about to make such a change of policy, you can guess what will happen.  Even more buyers will get off the fence, and listings will be snapped up even quicker than they are being snapped up now — if that is possible.

We keep hearing that inventory is low, and that’s true. But consider this: as of March 18th, 16,731 new listings had been entered on Metrolist since Jan. 1st, but 8,887 of them (53%) are already sold or under contract. During the same period a year ago, 17,207 listings were entered, but only 5,452 of them  (32%) had sold or were under contract by March 18th of that year.

Is this a good time to put a home on the market? What do you think?

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