Why Home Prices Are Rising. And Some Gorgeous, Weird Listing Photos

Here is Redfin’s monthly email newsletter, with a little about Redfin and a lot about what’s happening in the real estate market.

Howdy Redfin Fans!

Welcome to our action-packed newsletter on the U.S. Housing Market. First, what’s new at Redfin?

Redfin Expands to Charlotte, Publishes Details on Bidding Wars

For starters, Redfin just expanded to Charlotte and The Triangle area of North Carolina, with Houston, Delaware and the Bronx to follow this week.

To help you figure out what it takes to win a deal, we also began publishing stats and notes on the 1,000+ offers Redfin’s own agents write each month. This is juicy stuff:

Offer Insights

We also launched Redfin Collections, for sharing sets of pretty listing photos of celebrity homes, extreme taxidermy, luscious gardens, the weird stuff, gorgeous views, amazing kitchens, modern mansions and interesting art. Tucked into these Collections  are some  bizarre photos of how other people live and some lovely ideas of how, perhaps in another life, you and I could live:

Redfin Collections: Midcentury Perfection

Meanwhile, for would-be home-sellers, we published a data-driven report on how to get top-dollar for your listing:

  • by debuting in April not July, on Friday not Monday;
  • by paying for professional photos rather than the agent’s instamatic; and
  • by pricing at the middle of the market rather than the top, to attract competing buyers.

To learn more about listing your place, just give us a shout.

Silent Spring: Many Buyers, Few Sellers

But enough about us. What’s going on in the real estate market? The main thing is that many home-buyers can’t find a home to buy. After a year in which inventory fell 30%, things went from bad to worse. Through the first six weeks of 2013, new listings dropped another 18% over last year. Last December, we predicted it would start going the other way in 2013. You win some, you lose some.

What’s going on? Last year, the number of foreclosures reaching the market started to fall fast, as legal challenges mounted and banks saw their derelict properties plummet in value. In states that require court approval for a foreclosure, the number of foreclosed homes for sale peaked in the middle of 2012; elsewhere, foreclosures started falling three years prior. Mortgage delinquency rates have now declined to the lowest level since 2008.

But 2012 still had plenty of short sales, where banks agreed to let an underwater homeowner sell the place for less than the mortgage amount. Now this year, because of rising home prices and liberal loan modifications, fewer folks had to walk away from their mortgage, and even short sales began to disappear: short-sale listings are down 54% in 2013.

The Tweener Stage, Prices Up 10%

The market has now entered a tweener stage, where nobody has to sell, and not enough people want to sell either. Anyone thinking about listing a home bought in 2008 or 2009 is unlikely to make much money, and often decides to wait a bit longer for more price increases. As any East German will tell you, the transition from a command economy is always awkward.

As a result, 70% of the homes on which Redfin agents bid in January had competing offers; 30% of new listings were under contract in less than two weeks. Compared to last year, January prices increased 10% and sales increased 9.1%.

Home Prices are Rising

Sales would be much higher if there were more homes to buy. The number of construction projects started for single-family homes in the last three months of 2012 was up 44% compared to the same period in 2011 but still at just a quarter of the 2005 peak. Many builders are struggling to find lots anywhere in town that they can buy and develop.

What could slow the market down? Mortgage rates have increased in eight of the last nine weeks to 3.75%, the highest rate since last September. Eventually, money will get more expensive and buyers will become more scarce, but we don’t think that’s going to happen any time soon.

What’s your take on the market? Just leave a comment below or on Facebook.

Best, Glenn
Glenn Kelman | CEO, Redfin

Discussion

  • Bummed In L.A.

    I went to a Redfin first-time homebuyers seminar last summer and learned of the bidding wars and short supply in the market. This is the same crap I dealt with ten years ago when I first ventured into shopping for real estate and I’m not too excited about playing that game again. At least this knowledge let me decide that it was time to rent a house. Despite years of predictions of waves of foreclosures and market corrections to come, it turns out that things are not changing to any sort of favorable (or even fair) scenario for first-time buyers. My home buying aspirations will have to be put on hold indefinitely, I suppose. Unless I win the lottery and can pay cash.

    • http://blog.redfin.com/ GlennKelman

      I’m glad we helped you make an informed choice!

  • CeeG

    Hey Bummed in LA – I hear ya and empathize. Here’s what grinds my gears about the current dynamic: certain sector of “homeowners” being subsidized…. at the expense of renters, 1st time homebuyers (or would-be 1st time buyers), and homeowners that actually pay their monthly bills.

    What do I mean? Whilst many are struggling with inventory “shortage”, rising prices & rents, there are THOUSANDS of folks living FREE in occupied housing units all over the place. TONS of folks who have lived free (or skimming rent off tenants) for 3+ years because the banks will simply NOT foreclose for a variety of reasons.

    Who are these subsidized “homeowners”? The “poor, foreclosed homeowners” who borrowed irresponsibly during the bubble, but still haven’t had to face the consequences. They get years of free property usage AND either loan mods, or cash for keys, or $30k “reward” to short sale the property.

    So to “save” all these deadbeats… the rest of us suffer. THIS is what is rarely discussed in this whole thing.

  • Nostra”DAME”us

    Amen CeeG, One reason they won’t foreclose is to make people think the economy isn’t as bad as it really is…imagine that!! With the number of foreclosure being artificially kept low, it make the real estate market look better than it really is. Those people living rent free in homes that should be foreclosed on, are taking those homes off the market for 1st time homebuyers that are actually qualified to buy a home. We’ve heard so much in the news about “FAIRNESS”, but somehow this slips thru the cracks?? My prediction: right before the next presidential election, the banks will suddenly foreclose on all the properties in the “Shadow” inventory, and it will all be blamed on the new president (A Republican???)

    • CeeG

      Reasons foreclosures are NOT happening:

      1. Accounting shenanigans at lenders/servicers/investors who hold MBS. The full value of the defaulted loan can be held on the books at full face (inflated) value even though the collateral has gone down by 50% or more. Once foreclosed and REO, bam! Now you’ve got to mark to market and accept a REAL loss. As long as loan is not foreclosed you can “mark to model (or spreadsheet). Hell, even all the payments NOT being received can be accounted as “deferred income” and used to bolster earnings and, hence, share price. It’s all about hitting the quarterly numbers kids!

      2. Once REO, lender is now the actual owner – meaning have to pay taxes, insurance, HOA, maintenance, blight, fines, disposition costs, etc. As well as all the liability risk exposure.

      3. Servicers, banks, et al are under great pressure from myriad regulators and regulations – from OCC to Fed to Treasury to FDIC to AG settlements to HAMP to HAFA, etc. I have been present at many seminars where all the major lenders are adamant that foreclosure is the last thing they want to do; even when they’re fully justified in doing so. It often seems they’ve been thumped so many times (granted due to their own arrogance and incompetence), they’re jumping at their own shadow. Consequently, many “poor, foreclosed homeowners” are gaming things and taking advantage – BIG time. In this high speed internet era, ease of discovery of stall tactics makes it quick and pervasive; lots of folks get wise, fast. This is emboldened by too much misdirected public sentiment (and hence politicians’ pandering) towards the “poor, foreclosed homeowner” meme that is largely bullshit. Though anecdotal, I have personally observed HUNDREDS of cases where folks have squatted/skimmed for 3+ years, not a dime in payments, and still the lender hasn’t even filed an NoD!?!

      4. Most “banks” don’t own these loans they service. They’re just that – “servicers”. Even though on one hand (per the PoolingServicingAgreements) they often have to advance to the investors the monthly interest payments (not being collected from borrower), they also can rack up more fees on the default servicing (higher costs than regular servicing of performing loans). So even though they may have to go out of pocket now, they reap even more once the property is “resolved” (mod, short, REO)?

      So it doesn’t seem there is any grand gesture to “protect the economy”. No just a clusterf#@k of red tape challenges, loopholes, and narrow self-interest… another manifestation of “privatize gains, socialize losses” that is, sadly, all too prevalent in the American psyche. Everyone’s out for their own little selfish petty piece of nonsense; damn the common good or even more rational outcomes.

  • http://twitter.com/KongTravels Kure Kong

    Nah nah nah, we’re not listening…. to you, at least.
    We like the Talking Heads on the MSM, CNN, FAUX News, etc. on the pretty flatscreen on the wall. They tell… err, feed us, the “Truth”.

    Thank you for putting out the honest (and brutal) truth.

  • http://twitter.com/KongTravels Kure Kong

    What is wrong with renting until things come around? Hang on to your cash. You can park some of it in precious metals (gold/silver) as they will maintain savings value for you for a while even as the gubbamint keeps printing away.

    “Bet not they whole wad”. Keep your ammo dry, your eyes open for the right property, and be ready to strike when the iron is hot.

    You can only be a first-time homebuyer once, so don’t rush it. Once your wad of cash is tied up in a house it isn’t so liquid any more, so don’t buy (location, condition, property shape/size, neighbors, etc.) into any regrets.

    Good luck and happy buying.

  • RGAX

    Don’t be fooled when things looks bright & shiny, Bernanke is simply sweeping all the crap under the rug until his term ends. The stock market & the economy as a whole are so hooked on monetary stimulus & near-zero interest rate that they’ll never be able to stop the QE’s, much less mop up the excess liquidity without triggering another dip in the economy. I sympathize with the next Fed chairman who has to deal with the consequence. This goes with the housing market as well. Its so unfortunate that, just like an addict, we won’t deal with reality without hitting the bottom, and with no methadone to wean us off the credit drug.

  • azul

    Are you joking? “If there were more houses on the market prices would be higher”. Have you never taken a basic economics course. More houses for sale would lower prices. That is simply an economics fact. (except in medical economics but that is another story). There is still a huge shadow inventory of homes held my banks. They allow them to trickle out a few at a time to keep prices high so they can actually get more money for houses that are bank owned. The Fed helps by keeping interest rates so low. It is no longer a free market in housing. The housing market is now controlled by the big banks – nothing new there and the Fed.

    An idiot can see that so why do you tell lies. Like the housing situation is the fault of the non existant sellers. I have never trusted the Real Estate industry but I certainly trust a stranger seller to a bank or the National Real Estate Association. They were lying constantly as the housing market imploded. They were encouraging the public to buy in a collapsing market. Who trustworthy can an organization be? I would never listen to a word they say. And of course there is the clueless media except for a few bloggers who tell the truth. The clueless portion of the media writes or says whatever the industry tells them to say. Doesn’t matter if it is true or false.

    But none of this is good for the United States. These manipulations are brought to you by the same folks who say they want free markets. This is certainly not a free market and they know it. It completely controlled and it is sick.

    • http://twitter.com/Spingus spingus

      I think they mean the number of sales, not the individual home prices.

  • azul

    Well said, fellow commentators. I am so glad to see that no everyone is falling for the lies from the RE industry (many of whom don’t know anything but the lies the NAR tell them). I do wonder what is going to happen when more Americans realize how they are being played in this controlled market. Free Market, my foot.

  • diyadiva

    i came to know the market value.. thanks for posting

  • Dylan

    It definitely looks like home prices are back on the rise again! It’s incredible to see short sales and foreclosures selling for so cheap though, I know some friends that have got some pretty good deals.