Let’s face it, we are being bombarded by economic predictions of all kinds this month; so much so that I even hesitated to add my own to the massive pile.  But, since my mission is to provide you with  insight into our Lake Norman housing market and the role the national, state and local economy plays on our successes and weakness, I will once again do my best to assess and make predictions for 2012.

The last line of my 2011 predictions was actually a fairly accurate summary of 2011:

2011 may hold some surprises but for the most part it will be a year of stops and starts; ups and downs and hopefully dwindling inventory.

And, indeed, we did experience a significant shrinking of our inventory of active listings so the 2011 Lake Norman real estate market actually exceeded my expectations.

In some respects, I could pretty much just copy my 2011 predictions for 2012 as I really don’t see many short-term signs that would justify a significant change in either direction. With distressed sales currently representing only 10.8% of our active inventory in my opinion short sales and foreclosures will not drive or dominate our market as they did in the past, particularly 2009-2010.  That said, in the first two weeks of  2012, 46% of the properties that just went under contract were either short sales, pre-foreclosures or bank-owned which underscores the mood of our current buyers…they want bargains when possible.

Before I go into more detail, let’s look at the larger economic issues that will impact our local market.

The Big Picture:

2012 will be about jobs, consumer confidence, stability of the European economy, handling of the backlog of foreclosures not to mention a year of political elections.

• Most economists seem to agree that our country will experience a year of modest growth  in 2012.
• Interest rates are currently at record lows (under 4%) and are expected to rise hand-in-hand with the strengthening US economy but remain historically low.
• “A fresh emphasis on healing the housing sector by…the Federal Reserve, in the Obama administration and in state capitols reflects the view that a healthier real estate market would go a long way in strengthening the economy” according to an article on November 3, 2011 in Reuters. Good news that they are focusing on housing!
• The proposed Feds pilot program turning bank-owned properties into rentals and a proposal that Fannie and Freddie provide an 12-month reprieve or reduced payments for the unemployed are supported as positive efforts that will help stabilize our national housing market.  Home loans will continue to be a very challenging process and will play a role in hindering the ability for our housing market to improve.
• Unlike last year at this time, nationally and locally our unemployment rates are falling.
• Inventory of homes for sale and mortgage delinquencies are dropping nationwide and here in Lake Norman
• Regarding shadow  inventory of properties in the foreclosure process, one pundit summed it up very well: ”Distressed inventory’s impact isn’t so much to lower prices as to prevent them from rising for many years.”
• National Association of Realtors chief economist Lawrence Yun said: “Lower inventory is a signal that price declines are coming to an end….prices have been moving both up and down with no consistent direction since 2009.  In other words: prices have been roughly stable for the past 3 years.”
• The National Association of Home Builders is forecasting GDP growth in 2012 at 2.2-2.4% and single-family housing starts to gain 17% in 2012 “following what was almost the worst year on record in 2011… The bottom line for 2012 is that, while demand for new homes won’t ‘burst forward’, it will slowing improve now that the overall housing market appears to have reached bottom and started back on the path to recovery.”
• An article on 12/11, Money Magazine noted that 2012 is a great year to buy “if appropriate for you” based upon cheap interest rates and a slight uptick in the national housing market
• According to a survey (sponsored by Zillow Inc) of more than 100 economists, real estate experts and investment strategists, Home prices…won’t hit bottom until late 2012 or early 2013.
• An article this week in Kiplinger noted: “The bleeding is just about over, but don’t expect a speedy recovery…the worst is over…this doesn’t mean prices across the nation are poised to rebound any time soon.”  “2012 will be the year that prices finally stabilize, setting the stage for gains in 2013.”

North Carolina:

Our Lake Norman housing market is also going to be impacted significantly by regional economic components, especially jobs.

• “Economists are predicting a sluggish economic recovery for North Carolina and the nation in 2012″ according to an article in the Charlotte Observer on 1/4 2012.    According to attendees at the recent Economic Forecast Forum sponsored by the NC Chamber and NC Bankers Association, “don’t expect dramatic improvements in the state unemployment rate this year.”
• Predictions for North Carolina: N.C. Jobless rate will drop to 9.3% from 10% in 2012. N.C. economic growth for 2012 will be 2% and N.C. will gain 40,000 jobs in 2012 compared to about 21,000 in 2011.
• North Carolina is still a destination for many from around the country ranking among the fastest-growing states according to the U.S. Census Bureau.  Altas Movers also ranked North Carolina in the top ten “inbound” states where more people move into the state than move out.  Good news for our long term market!
• North Carolina also ranked at the very top for the number of retiree’s moving to the state by the U.S. Census Bureau.
•  Forbes and Site Selection both ranked North Carolina 3rd in the best states for business/best business climate and in 3rd place on the list of migration to rather than from the state.
• North Carolina ranks among the states with the lowest number of foreclosures, coming in at 34 according to a Charlotte Observer article on 11/11/11.

My Predictions:

• Buyers will continue to expect bargains sometimes unjustifiably so.  With such low inventory, I am seeing properties that have been sitting selling at prices that are higher than the past few years. Sellers will need to steel themselves for low-ball offers as buyers continue to feel the need to attempt to get a very low price.  This will change as prices stabilize and consumer confidence rises.  It is important to note that this varies greatly by price range and neighborhood.
• Foreclosures and short sales will continue to make up about 1/3 of our Lake Norman sales but represent only about 10% of our inventory. We will continue to see active listings slowly evolving into short sales or foreclosures and new foreclosures coming on the market as the shadow inventory is cycled into our market.  These will sell at a disproportionately higher rate that non-distressed properties.
• Shadow Inventory?  One of the biggest questions I have again this year is just how many Lake Norman homeowners are either waiting to sell until they see a turn in the market or have withdrawn their homes from the market while planning to bring them back on the market once they see signs of improvement.  Our inventory is currently at record lows and we are closing in on our goal of 6-8 months of supply. The question is will a large number of sellers who have been waiting now jump into the market as they see sales improving thus weakening our recovery?  And, how many foreclosures are coming?
• More of the same?  Yes and no.  We are starting out 2012 with weak sales numbers but significantly lower inventory as well.  In 2012 I think we will continue to experience erratic monthly highs and lows in sales.  Foreclosures and shortsales will continue to keep our overall average prices down but will not dominate our prices in every price range or neighborhood. As pent-up home-buyers begin to accept that our Lake Norman housing market is stabilizing, they will take advantage of the low interest rates and jump off the fence when they find the right home that suits their needs.
• With inventory so low, I predict that our sales will remain at about 900 in 2012 which is about equal to the past two years.  Our overall average prices will stabilize but there will be many fluxuations within price ranges, neighborhoods, waterfront properties.  I feel pretty confident that 2012 is the year to buy waterfront properties as I watch the inventory of nice homes with good water at great prices disappearing and not being replaced.  It is going to more important than ever for buyers and sellers to know their specific niche’s recent comparable sales and not to rely on old data.
• Be informed, be smart and be realistic!

I would love to hear your thoughts and predictions. Please leave a comment!

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Lake Norman Relocation Resources 

Despite a pretty rough month of economic news, here in Lake Norman we actually had some news to be thankful for in November! 

As I anticipated last month based upon the higher numbers for Conditional and Pending home sales in our Lake Norman area, we posted some relatively strong numbers in November when compared to last year and even the year prior to that:

The total number of Lake Norman single family homes under contract (but not yet closed) on November 30, 2010 totaled 169 which is a drop of 13% from last month’s high but still 8% higher when compared to August’s and July’s numbers of  157, equal to June’s 169  and 15% below May’s closings.

Here are the details:

•  Active Listings dropped another 15% from a year ago.  Based upon our November closed sales, we now have 14.8 months of inventory.  While our goal of a truly balanced housing market of 6-8 months of supply is still out of reach this is the strongest absorption rate we have had since I started doing these sales analysis in early 2007.  To achieve these numbers given our current inventory levels we will need to sell about 140 homes per month.  Clearly we need to have a combination of increased sales and decreased levels of active listings in order to return to a balanced market.  However, it is very good news that our inventory is continuing to shrink to record lows each month.  Note that the average price of our active listings dropped 15% compared to November 2009.  We continue to see a number of price reductions

• Contingent Sales, which don’t account for a signifcant segment of our housing market, increased by 20%.  This only represents two more properties so clearly most sellers are not willing to accept an offer contingent upon the sale of a buyer’s home due to the overall weak housing market.

•  Conditional Sales increased 44 % this month when compared to November 2009.  These are homes that  just went under contract and still have financial and inspection conditions. They will represent closed sales in either late December or January and would seem to indicate that the sales in Lake Norman in the next month or two will be substantially higher than last year’s numbers. This is the strongest trend we have seen for a long time!

• Our  pending sales represented a 9%  decrease from a year ago.    These are the contracts that are past inspections and are just waiting to close.  Pending sales are usually the best indication of closed sales in the next few weeks. These numbers would indicate that our closed sales this month will be equal to or slightly lower than both last month and December of 2009.

• The number of closed sales increased 21% compared to 2009 and our average price was up 21%.  It is important to consider that this increase in the average sales price represents a strengthening of our higher-priced home NOT an increase in our overall prices. 

Here is a breakdown by price-range of our November 2010 closed sales in Lake Norman’s area 13- to 13-5:

• $42,000 – $199,999:   14            (Conditional,  & Pending = 22)
• $200,000 – $299,999:  14      (Conditional & Pending = 34)
• $300,000 – $399,999:   11     ( Conditional & Pending = 28)         (50%)
• $400,000 – $499,999:  6       ( Conditional & Pending = 19)
• $500,000 – $599,999:  7       ( Conditional & Pending = 15)           (20%)
• $600,000 – $699,999:  8       ( Conditional & Pending = 16)
• $700,000 – $799,999: 2        ( Conditional & Pending = 8
• $800,000 – $899,999:  4       ( Conditional & Pending = 5)
• $900,000 – $999,999:  2       ( Conditional & Pending = 3) ($600,000 – $1mill = 19%)
• $1,000,000 – $1,999,999: 5  ( Conditional & Pending = 18  WOW!)
• $2 million+ : 3 ( Conditional & Pending = 1)($1million+ = 11%)
• (Total Conditional, Contingent and Pending = 169)

In October, 61% of our Lake Norman home sales were under $400,000 and 77% were under $600,000.  Last month 51% of our home sales were under $400,000 and 68% were under $600,000. Note that our current Lake Norman properties under contract just about match November’s numbers and continue to reflect a higher-end niche of our market that is showing life for the first time in several years.  Waterfront homes make up the bulk of the higher-end home sales right now.  As prices come down buyers are scooping up these properties realizing that they may not see these prices with such good quality of water again.  It will be very interesting to see if this trend continues into the winter months.

 6-Year Comparison of Lake Norman Home Sales By Month

* Please note that all of my numbers come from the Charlotte Region Multiple Listing Service and will not include sales that took place outside of our MLS.

 **I have made an adjustment of  the totals reflecting the ACTUAL  sales  every month in 2009 and 2010 and the totals in the prior calendar year.  The columns may not add up but I do my best with what I have to work!  I also adjust past months when I do the monthly update as a few more sales are usually input late by agents.

Summary

Here is a snapshot of Lake Norman home sales numbers in the context of the past 6 years.   Our 2010 November sales were 21% higher than 2009 and 65% greater than 2008.  We are already 4% higher in total annual sales for 2010 compared to 2009 and, based upon our current number of Lake Norman properties under contract,  it looks like we will match the overall 2008 numbers. 

 It is also worth pointing out that if we close about 75 sales this month it will be the strongest December since 2006! In my opinion, significant price reductions are inspiring buyers to jump off the fence.  It will be a very interesting winter! 

 OTHER ARTICLES of  INTEREST 

Lake Norman Relocation Resources

Lake Norman Foreclosures, Short Sales and Green Homes…Search HERE!

However, on the negative news side, there still exists the concerns about the “shadow” inventory expected to come on the market next spring and a second round of foreclosures brought on by Option ARMS and Alt-A loans that are resetting over the next 18 months.  Some are saying that this second wave of foreclosures, which for the most part are not subprime, will hit the mid-range and luxury home markets because these are loans that the middle class Americans got during the 2004-2007 time-frame.  And, getting new home loans, especially jumbo, are still extremely challenging and a tedious process at best.

Our conforming loan rates dipped back down to near record lows this month until the positive job numbers came out last Friday.  Mortgage rates immediately jumped back up into the +5% range.

How does this national news compare to our Lake Norman real estate market?  Let ‘s look at our November numbers:

Lake Norman’s November 2009 Housing Statistics

• Contingent Sales are down 33%  compared to the 15 in October.  These are the homes under contract that are contingent upon the buyer’s home selling

• Conditional Sales dropped slightly compared to 60  in October.  This confirms that recent activity remains at about the same level as last month

• Pending sales remained pretty stable compared to 87  in September and 85 in October.  While our closed sales have dropped significantly since last month, these strong pending numbers indicate that our sales in December should be higher than 2008.  

• The number of closed sales dropped 37%  compared to last month.  However, they were 24% higher than November of 2008.   I am now feeling pretty confident that our fourth quarter 2009 sales will be significantly stronger than last year’s record lows.  

 5-Year Comparison of Lake Norman Home Sales By Month 

* Please note that all of my numbers come from the Charlotte Region Multiple Listing Service and will not include sales that took place outside of our MLS.

**I have made an adjustment of  the totals reflecting the ACTUAL  sales  every month in 2009 and the totals in the prior calendar year.

Summary

What immediately stands out is that the past two months our Lake Norman sales of existing homes has been higher than the same months in 2008.  It is important to remember that these were the months in 2008 with the financial crisis hit our US economy.  While we are not going to equal the total number of sales of 2008 this year, if you look at our trends since January there is an obvious trend of improving home sales, especially in our 4th quarter.

However, if you compare our 2009 monthly sales to 2007 we are still coming up significantly short every month through November.  It will be very interesting to see how our December sales play out given the number of pending sales.  We might actually meet our December 20o8 AND 2007 numbers.

Based upon our November sales we currently have 23.4 months of active listings which increased from 17 months in October and is 4 times the 6-month levels of a balanced housing market. 

There was a wonderful article by Bernice Ross on 12/03/09 in Inman News which listed 5 factors that will impact 2010 home prices:

• “Markets aren’t just local, they’re “hyperlocal….To determine what will happen in your local market, you must consider the “hyperlocal” or “micro” market conditions.”
• “Months of inventory on the market are the best predictor of price changes…During the 30-plus years I have been in the business, I have found the amount of inventory in a given location and price range to be the best predictor of what prices will do several months from now.”  Yes!  As I have been saying every month, the real issue is how much inventory is on the market in our local Lake Norman market.  Considering we are at about 4 times the levels of a balanced market, Lake Norman will still experience price reductions until these numbers improve.
• “Extension of the first-time buyer and addition of the resale buyer’s tax “
• “Demographics bode well for increased sales activity”  She points out the timing for Generation Y and Baby Boomers as a plus for home sales.
• “The real issue: cost of ownership, not sales price…This is a huge wild card for a variety of reasons.  If interest rates increase from 5 to 7 percent, or even from 5 to 6 percent, the impact on monthly payments would take would-be buyers off the market.”
• Bottom line: Watch for sales levels and the inventory in your local area.  If sales are increasing and inventory is decreasing, look for stabilization of prices first and then, eventually, an increase in sales.”

I would add one more to this list:  the potential tightening of underwriting standards by FHA and any other added challenges to our already very difficult home loan process.

Stay tuned for our December sales analysis, my year-end sales analysis and my 4th quarter sales analysis by price range which will come out in January!

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Lake Norman Real Estate’s Waterfront Home Sales Analysis November 2009

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 Lake Norman Real Estate:  Why is it so hard to buy a home right now?

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If you have been following the national real estate business news this past month, these are just some of the comments/headlines you might have read:

“Credit shortage has strangled recovery; households are in bunkers under collapsed net worth, and not coming out until home values are safe.”  (Lou Barnes, Inman News)

 

“The jumbo loan mod ‘pipe dream’”  (Bernice Ross Inman News)

 

‘Mortgage Delinquencies – The Coming Storm….While subprime mortgages sparked the first round of housing problems two years ago, now troubles are lurking further up the food chain…White-collar job losses have accelerated while more adjustable-rate loans to prime borrowers are resetting to higher payments…” (Chief US Economist at MFR Inc. Joshua Shapiro)

 

“Credit Woes to Threaten Housing Recovery?”  (Consumer New and Advice and RISMEDIA)

 

“Across the country, homebuilders and developers are reporting a deterioration in credit availability and intensifying pressure on borrowers with outstanding loans.”  (National Association of  Home Builders Chairman Joe Robson)

 

At the same time the National Association of Realtors report a record 7 straight months of pending home sales increases.  It is truly impossible to find any consensus on the future of the US housing market.

However, by taking a look at our local numbers we can have a better understanding the current Lake Norman real estate market and home sales trends and glean potential mini-trends from these.

Lake Norman’s September Housing Statistics

• Active Listings continue to decline (3.7%), this is a important part of our Lake Norman housing recovery.  Again, note the average price of our active listings when compared to the average price of our solds this past month. Our high-end market is still suffering in part due to the difficulty getting jumbo loans.

• Contingent Sales are up slightly compared to the 14 in August.  These are the homes under contract that are contingent upon the buyer’s home selling

• Conditional Sales are also up slightly compared to 54 in August.  This confirms that recent activity remains at about the same level as last month

• Pending sales dropped slightly compared to 91 in August.  This would further confirm that we might expect October closed sales to be about equal to September.

• The number of closed sales jumped 25% compared to August but dropped about 5% when compared to September 2008.  If we stay equal to 2008 winter sales we will experience a significant slow down.  The fact that October looks about equal to this past month indicates we might actually have stronger 4th quarter sales than 2008.  While this is relatively good news, it is hard to predict past October at this point.

 5-Year Comparison of Lake Norman Home Sales By Month 

* Please note that all of my numbers come from the Charlotte Region Multiple Listing Service and will not include sales that took place outside of our MLS.

**I have made an adjustment of  the totals reflecting the ACTUAL  sales  every month in 2009 and the totals in the prior calendar year.

Summary

Overall it is my opinion that sales may be a bit stronger in our fourth quarter compared to last year.  Granted, we are up against some very weak sales but it does appear we may experience some improvement.

One of the most important trends to watch right now are the prices ranges of Lake Norman homes that are selling.  Of the 78 homes that sold last month, only 20 were above $500,000.  First-time buyers are taking advantage of the $8,000 rebate and most other Lake Norman home buyers are gobbling up the foreclosures and other bargains that are now available.  Some foreclosures are priced as much as 50% of the price they sold in 2005 or their original listing price. 

Based upon our September sales we currently have 18.5 months of active listings which is 3 times the 6-month levels of a balanced housing market.  We are still clearly in a buyers’ market.  It is so hard to predict what will happen if the $8,000 credit is not extended and the “shadow inventory” of potential foreclosures come to fruition.

In the next week or so I will do my 3rd quarter sales analysis by price range to provide greater insight into our Lake Norman real estate market.

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The future of our Lake Norman Real Estate market may depend as much on government and financial regulations and the progress of the US economy as it does on our local economy.  Nationally, the housing market has been greatly impacted by new regulations that have made the ability to get home loans much more difficult.  Since we rely so much on relocation buyers, Lake Norman’s housing market gets hit twice, once with the difficulty of folks wanting to relocate here having problems selling their homes and once because our potential Lake Norman home buyers are having a hard time getting loans on purchases.  Here is a summary of some of the details related to our Lake Norman housing market:

The Home Valuation Code of Conduct rules employed by Fannie Mae and Freddie Mac since May 1, 2009 for home appraisers have had such a negative affect on the national housing market that the National Association of REALTORS, The Mortgage Bankers Association and the National Association of Home Builders have united in an effort to get the federal government to ”establish consistent appraisal rules for FHA and the GSEs” (Fannie and Freddie) and gain official clarification of these new appraisal rules”. 

Is the FHA (Federal Housing Administration) in trouble?  Rumors have been flying about whether the FHA is running out of reserves due to mortgage losses.  According to a recent press release, the FHA “will tighten credit standards and implement new rules for appraisals on January 1, 2010″.  They went on to say “FHA’s insurance fund is sufficient to cover future losses, but the tighter policies will ensure that the loan guarantee remain self-sustaining….”  (David H. Stevens, FHA Commissioner).

The Federal Reserve will stretch out mortgage purchases according to their news release yesterday.  This means they will continue to purchase mortgage-backed securities that have helped keep mortgage rates low by extending the $1.25 trillion program’s sunset from the end of 2009 to March of 2010. Good news!

The First-Time Home Buyer $8000 rebate expires November 30th. There are some efforts to get this extended but they don’t seem to be getting traction.

A new bill was signed into law in North Carolina several weeks ago that is meant to stem the foreclosure rates.  The legislation requires a court clerk to determine whether a mortgage holder has been able to talk to their lender about working out a way to pay the loan and whether the lender has given the mortgage holder sufficient notice before trying to foreclose.    “This legislation allows time for loan modifications” according the NC Attorney General Roy Cooper.

From the trenches I can tell you that home loans and appraisals have been and continue to be a significant problem here in the Lake Norman housing market.  Lenders are now having to use third-party appraisal management companies to hire appraisers who in many cases are not experienced in the area of in which they are appraising properties.  Underwriters are taking second looks at the loan packages as late as the day of closing leading to days of delayed closings.  Most feel this is because the underwriters are afraid that the loan they approve many not be saleable to mortgage purchasers like Fannie and Freddie. 

Where is our Lake Norman real estate market today?  I just took a quick look at our September month-to-date numbers on our MLS.  With 39 closed sales so far this month, it looks like our September sales will be down from both last month and last year.  However, the pending and conditional home sales look a bit stronger so we may see a slight increase in closed sales in October.    Our inventory remains about the same as last month.   According to an article in the Charlotte Observer on September 10th the entire Charlotte area saw some positive signs.  However, Mecklenburg County “saw sales and prices down 12% ” and “Iredell’s average price decline of 17% was the biggest” of all of the counties. (Compared to 2008).

Where is the Lake Norman housing market heading?  Some of my savvy home buyers have jumped off the fence and are actively looking and buying.  This is because they feel there is a window of opportunity this fall.  With high inventories and dropping prices, sellers may be psychologically feeling more anxious than they will be when Spring comes and they have renewed hope that the market will improve. With interest rates back down to about 5%, I would have to agree that this fall may be a good time to make a move. 

Sometimes I wish I didn’t have to write posts like this one.  I remember when buying a home was about just that, finding the right property in which to enable a family to create their dream  home…not an investment.  Some home buyers still feel this way but most care more than ever about the pricing and timing of their purchase.

Other Articles of Interest

Lake Norman Real Estate’s September 2009 Hot Sheet 

Lake Norman Real Estate’s August 2009 Sales Report

 Lake Norman Real Estate:  Why is it so hard to buy a home right now?