As 2011 fades into 2012, local REALTORS® are expressing optimism that the worst of the housing meltdown is behind us and that better times are ahead for Indiana homeowners. In their most recent release, the Metropolitan Indianapolis Board of REALTORS® claims that quarterly home prices rose 4.1% over the previous quarter while the number of closed sales rose 13% and the number of homes in inventory declined by 8.2%.
The report seems to suggest that the housing market is bottoming, if not turning around, and that is indeed good news for those who have been battered by lower prices. That said, home buyers and sellers should look at such pronouncements with a jaundiced eye. MIBORs parent organization, the National Association of REALTORS® (NAR), recently admitted to overstating sales numbers. This overstatement suggests that the market is actually weaker than NAR previously disclosed.
Sales numbers here mirror trends in a number of markets around the country. This suggests that the surge in prices and buyers may be short lived. What’s worse, the respected Standard and Poors / Case-Schiller Price Index shows that home prices are hovering near their lows and show little signs of recovery in the near future.
What it all means going forward is anybody’s guess. Still, home buyers and sellers in central Indiana would be wise to look at a couple of time tested measures as well as one overlooked indicator before making a decision to buy or sell a home.
Interest Rates
REALTORS® and bankers know that interest rates determine the health of the housing market. In a low rate environment, homes move more quickly than in a higher rate environment. For the last two years, rates have hovered at historical lows. They won’t stay there forever. When they rise, housing will become more expensive and the number of buyers will decrease.
Employment
Unemployed people don’t usually buy houses, and with unemployment in central Indiana still hovering around 9%, it’s easy to understand why there are so few buyers in the market. Since late 2009, regional employment has been slowly growing. There’s reason to believe that will continue in 2012. For one thing, it’s an election year and historically, unemployment rates go down in election years. Even so, there are those who continue to call for a double dip recession and there is compelling evidence to support their contentions. The nascent housing “recovery” could evaporate in a hurry if there is an uptick in unemployment.
Consumer Confidence
Consumer confidence is a difficult number to pin down. Several organizations including the University of Michigan publish respected consumer confidence indices. That said, forecasters have discovered that gas prices offer a quick and accurate way to gauge just how good consumers are feeling. When prices rise at the pump, consumers are anxious and spend less. When they’re falling, people feel much better.
By this time next year, we’ll know if housing is on the road to a real and lasting recovery. At this point, it’s simply too early to tell. Keep an eye on the three indicators above and you’ll have a better feel of what to expect. Happy New Year.
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