As we zero in on a new year, we reflect on 2012 as the year the real estate market turned a corner. At this year's end we see another downward adjustment in mortgage interest rates to which most react with a ho-hum attitude. We have enjoyed rates that are so low that a minor change in either direction does little to stimulate a more pronounced reaction. Mortgage buyer Freddie Mac shows the average rate on a 30-year loan declined to 3.35 percent from 3.37 percent last week. That's not far from the 3.31 percent rate of about a month ago, the lowest on records dating to 1971.
These historic rates have no doubt helped in the recovery since never has money cost so little to borrow. The nation has reacted favorably and movement in the housing market at least is on its way up as it is locally. There are many positive reports of improvement and short of a national financial disaster, it appears we are out of the woods.
Pending home sales increased in November for the third-straight month and reached the highest level in two-and-a-half years, according to the National Association of Realtors.
The Pending Homes Sales Index, a forward-looking indicator based on contract signings, rose 1.7 percent to 106.4 in November from a downwardly revised 104.6 in October and is 9.8 percent above November 2011 when it was 96.9. The data reflect contracts but not closings.
The index is at the highest level since April 2010, when it hit 111.3 as buyers were rushing to beat the deadline for the homebuyer tax credit. With the exception of several months affected by tax stimulus, the last time there was a higher reading was in February 2007 when the index reached 107.9.
Lawrence Yun, NAR chief economist, said home sales are on a sustained uptrend. "Even with market frictions related to the mortgage process, home-contract activity continues to improve. Home sales are recovering now based solely on fundamental demand and favorable affordability conditions."
On a year-over-year basis, pending home sales have risen for 19 consecutive months.
The upward momentum means existing-home sales should rise 8 to 9 percent in 2013 to approximately 5.1 million, following a 10 percent gain expected for all of 2012. The median existing-home price is projected to rise just over 4 percent in 2013, after rising more than 7 percent in 2012.
This, of course is good news for sellers who have been waiting for some price appreciation. Not so good perhaps, for those who are still struggling to qualify for a low or zero down mortgage to capitalize on bargain basement priced properties. As foreclosures decline in our market, and nationally, those bargains have become harder to find and buyers for those properties find themselves competing and in some cases, paying more than the list price to win the home.
More than interest rates then, increasing prices are likely to provide motivation to the qualified buyer in the coming year. A recent survey by Home Gain showed increased optimism for price appreciation. In the survey, Idaho was listed as the No. 1 state where real estate professionals are most confident about rising home prices over the next six months. Idaho, especially in the south, was one of the hardest hit by foreclosures during the housing bust. The modest appreciation seen in the past year will have to accelerate before many of the homeowners who managed to keep their homes will get back to a level equal to what they paid, but movement is certainly positive.
There are many reasons to be bullish on housing. As the market continues its upward trend and absorption of existing homes continues, we anticipate a resurgence of new home construction to accommodate buyers that have yet to be identified. It is nice to know that maturing populations who are leaving their family homes still look forward to owning their own according to the latest polls.
All in all, 2012 was a pretty decent year for most of our market. As we begin a new year we anticipate those market segments that still struggle to gain ground will do so in 2013.
To our members and our community, we thank you for your support in 2012 and wish you a better and brighter 2013.
Trust an expert...call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.
Kim Cooper is a real estate broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling (208) 667-0664.