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Business Building: Don’t Be Confused by Conflicting Reports—Focus on the Consensus

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By Margaret Kelly

Housing headlines have led to a lot of head scratching over the past several months. Are prices going up or not? Are sales increasing or not? Has the market reached the bottom or not?

You may be thinking these messages can’t all be right; the strange truth is they’re not all dead wrong. What they’re representing is the sawtooth pattern of growth we can expect to see in the United States throughout 2012. Recovery isn’t going to look like a straight incline on any graph over the next few years; it’s going to show an upward trend with smaller peaks and valleys within that rise.

Every local market’s recovery is going to look different. In some areas, the prices may go down a bit more before a noticeable resurgence, and in other areas, prices are already rising. Others will go up and down frequently.

So focus on the big picture. Although it may seem that reports are canceling each other out, there is consensus in several key areas.

This year will be better than last year. For the first time in 18 months, the RE/MAX National Housing Report of February home sales in 53 cities showed home prices increasing 1.1 percent from a year ago. Home sales increased 8.7 percent, marking the eighth straight month of increases from the previous year. Another good sign: foreclosure activity continued a downward trend for the 20th straight month. Collectively, the worst is behind us.

Investors are sending a strong message. Increased activity among investors is one of the most telling signs that housing is turning around, and their activity is sky high. According to NAR, investors purchased 23 percent of existing homes sold in February, up from 20 percent a year ago. Another NAR report released in March reveals second-home sales rose an astounding 64.5 percent in 2011. This is highly representative of the evolving profile of a real estate investor. More single-home owners want a piece of this historic buyer’s market, and in some cases, they’re even using funds in individual retirement accounts to purchase a second home.

Household formation will bring construction back. In 2011, just 300,000 new homes were sold. That’s a far cry from the peak of 1.3 million new homes sold in 2006-2007. The fact is, there’s significant pent-up demand for new homes, and we’re going to be underbuilt. The demand is going to come from an increase in new household formations. A recent 10-year average of household formations in the U.S. totaled 1.2 million per year; in 2010, just 357,000 households were formed. As personal situations change, people will begin to refocus on goals of homeownership, and new construction will be part of those goals again.

There may never be a better time to buy. We are living in historic times, with record-low mortgage rates and home prices not seen in years. Agents in some markets are reporting multiple offers on homes, which is a strong indicator of consumers gaining new confidence in the economy and housing market. As demand increases, so will interest rates and prices. These prime conditions won’t last, and as consumers begin to realize this, they’ll turn to real estate agents to help them maximize this unique opportunity.

Many factors indicate we’re in a recovery period. If you’re not seeing encouraging signs in your market, don’t be discouraged. Many of the positive headlines are coming out of the hardest-hit areas, such as California and Florida. Just as the negative ripple effects of the recession in these places came your way a few years ago, the positive ripples will come your way, too. The momentum is moving in the right direction.

Margaret Kelly (CRB) is chief executive officer of RE/MAX, LLC. RE/MAX earned “Highest Overall Satisfaction For Home Sellers and Home Buyers Among National Full Service Real Estate Firms” in the J.D. Power and Associates 2011 Home Buyer/Seller StudySM. For more information, visit remax.com.

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