Is the real estate market really recovering?
A home is offered for sale by Prudential in a Toll Brothers housing development in South Barrington, Ill.
We've been buried in housing news this week -- new home sales, existing home sales, housing inventory, foreclosures, repossessions. That's a lot of great data, but it's all contradictory. You'll read in one publication that the housing market is recovering, and then hear some expert elsewhere saying we're still in the dumps. What's going on? We've decided to cut through the confusion and get to the bottom of things.
For the next several weeks, Marketplace will be digging into the foundations of the housing market to find out what's really going on in real estate. We'll start by talking with Glenn Kelman, president and CEO of Redfin, a real estate and technology company that's been tracking housing trends for almost a decade now.
"I think we're back. Prices are up about 10 percent year over year nationwide. There are some markets that aren't doing quite as well as that, but there are others that are just roaring. Arizona and California lead the way. There we see less than a month of supply, people are going crazy trying to buy homes. Demand has been extremely strong. People are very excited about trying to buy a home. Their frustration is that they just can't find one to buy."
What about all those foreclosed properties that were clogging up the inventory pipeline? Have we worked our way through that?
"Mostly we have. I think banks have figured out that it takes two years to kick somebody out of a house and usually they lose about 50 cents on the dollar when they do. So now they just approve a short sale or modify the loan and as a result, we're seeing more Americans able to sell a home without having to hit the bricks, without having to clear out because of a foreclosure," says Kelman.
Can we expect banks to approve more short sales?
"In places like Arizona, the whole reason the market's recovered is because banks have gotten a lot more liberal about approving short sales and much more reluctant about going after someone in a foreclosure. It takes too long, there are too many legal costs. After the robo-signing scandal, I think they just got [religious] about short sales and said let's approve it and make it a lot faster and easier than it had been before. So really the past year has been the year of the short sale and that's the main reason the market's come back," says Kelman.
Interest rates are still at fire-sale prices. If you're in the market for a home right now, is this the time to jump at it?
"It's hard to say that about every market and every situation. Certainly money's not going to get any cheaper. I think it's tough to say when home prices are going to bottom in any particular market. But we know that mortgage rates have hit a bottom. So before you buy a house, you have to buy the money to buy a house and the money will never be cheaper. These are historic lows and that's really what's driving most of the demand," says Kelman.
These charts and graphs from Redfin below illustrate changes in the housing market from the last year for some of America's biggest metro areas: