Will 2014 prove to be the year of growth? We at Alaska Home Sellers absolutely believe it will be. 2013 proved to be the year of stabilization as investors purchased an enormous amount of the "low hanging fruit", including the thousands of foreclosures that were available. They were compelled to enter the market and invest after they watched from the sidelines during much of 2012 to see if the bottom had indeed drawn near and the market would start to recover. And when they jumped 'feet first' into the market over the last 12-18 months they substantially, and knowingly, reduced the remaining inventory (homes for sale) levels causing a rapid increase in values. With real estate being a market like anything else, it is predicated on a "supply vs demand" principal. The more demand there is for something, the price naturally increases on the remaining supply.
In an ideal world, you would always like to buy at the bottom of a market and sell at the top...but all too often, when the consumer 'senses' the market has hit the bottom, it has already made it through the lowest point and has already started back up. Conversely, when a seller 'senses' that the market is at it's peak and tries to time their sale, the market has often already started a downward trend.
The investors over the last 12-18 months have hedged their bets with a bit of 'insider trading' of sorts. Knowing that the price of the housing would increase with a decreased supply, they purchased untold amounts of it with that knowledge. In a way...they were hedging that bet by purchasing placing large volumes of real estate (in many cases entire blocks filled with empty housing) into their portfolios and renting them out knowing that their asset would gain almost instant equity by virtue of the supply vs demand dynamic. They know that reducing the inventory increases the price.
It's in large part why areas like Nevada have experienced phenomenal year over year appreciation as illustrated in map below compiled by FHFA's third quarter report in 2013.
The bi-product of their investing has had a pleasant side affect that existing homeowners have been able to take advantage of. Rather than being subjected to a long protracted recovery, the investor involvement has accelerated the recovery exponentially. As you look at the map above, you will see those areas that were hit the hardest during the housing bubble bursting, are recovering at a much higher rate than those areas that were least hit. Investors aren't interested in single digit returns on their money...they are interested in the big returns!
And with the values rapidly recovering, the number of mortgage delinquencies is on a sharp decline as well. Homeowners over the last few years that were 'upside down' in their homes and couldn't afford to sell because they would have to bring a check to the closing table, are suddenly learning that the market has often recovered to a point where they can now sell and actually walk away with a check in many cases. And voilà, delinquencies are dropping like a rock. The following map is from the National Association of REALTORS from December 2013.
We at Alaska Home Sellers feel that there is an ENORMOUS amount of pent up energy with existing homeowners that would love to be able to move...maybe to a larger home due to an increase in family size, or that have job opportunities in another area but couldn't accept them due to their negative equity positions in their existing homes. Not only do we feel that 2014 will be the year of growth, we are starting to see signs of it being larger than even the experts are predicting. All of this teamed up with our post about the Boomerang Buyers a couple of weeks ago is further evidence that 2014 will prove to be the year of growth.
Of course all real estate is local...and Alaska real estate is no different. The Matsu real estate market is off and running for the year so if you have been sitting on the sidelines trying to decide what to do, this might be your year to make the move that you have been dreaming of.
There is no substitute for competent counsel and advice when it comes to making decisions regarding large financial matters. If you are curious how the local market is impacting you and would like to get our professional advice along with a customized analysis based on your individual real estate goals, you can call our office at (907)352-1828 to set up an appointment to discuss them.
