Significant changes in economic factors in coming months could still impact the strengthening market, including reduced affordability levels, rising mortgage rates, and federal fiscal uncertainty – both recent and ongoing. The National Association of REALTORS® (NAR) reported in October that affordability has fallen to a five-year low as home-price increases easily outpaced income growth, and projected mortgage rates to rise to 5 percent by mid-summer of next year. NAR also warned that complications with the mortgage loan process resulting from the government shutdown are just one factor that may impact fourth quarter sales closings.
Top Turnaround Towns
No. 1 – Detroit, Mich. Once the poster child for America’s ailing auto industry, Detroit has turned around its housing markets. Instead of sinking when the city of Detroit had just filed for bankruptcy, its housing markets took on a quiet resurgence. Last quarter it ranked 7th in the report, and this rapid jump to number one speaks volumes about its pace of acceleration.
With the end of the buying season, prices in Detroit slowed in the third quarter, falling 4.8 percent from the previous quarter but 44.3 percent above the third quarter of 2012. Equally important is Detroit’s success at trimming its for-sale inventory and the age of its inventory, down 24.5 percent and 33.9 percent respectively, year over year.
No. 2 – Santa Barbara-Santa Maria-Lompoc, Calif. Despite some tough competition by other hot markets, Santa Barbara moved up to second place due to the young age of its inventory and the noticeable decline in its inventory counts. This market is the only one on the top 10 list that appeared in Turnaround Town Reports for the previous quarter as well as the same period last year. This appearance, at number two, is its highest ranking to date and most likely due to its strong performance in categories such as median age of inventory improvement, as well as median list price improvement. It also is noteworthy that Santa Barbara is now the only remaining California market on this list, compared to reports from last quarter and the year-ago quarter, which were populated by six and seven California markets, respectively.
No. 3 – Reno, Nev. With declining inventory and a drop in sales, this market is now moving into a far healthier balance than it experienced this time last year. Achieving both this balance and healthy growth is a remarkable achievement for a market that lost significant amount of its value in years past. Through the third quarter of 2013, Reno has continued to reduce inventory at a rate of 19.8 percent and prices are up 28.2 percent compared to the third quarter of 2012.
No. 4 – Fort Lauderdale, Fla. Still down 13.8 percent this quarter compared to year-ago levels, Fort Lauderdale’s inventory shortfall has lit a fire this year under once-lagging prices. As inventories remained flat in recent months, prices in Fort Lauderdale have risen in the third quarter of 2013. The region is entering a more buyer-leaning marketplace, with reports of sellers in Fort Lauderdale offering incentives to purchase, such as seller contributions to buyers’ closing costs and allowances for upgrades and renovations.