Marching Into Spring, Realtors' Hopes Rise
For real estate agents, March Madness has begun.
The rush is on to throw out clutter, paint walls and clean carpets. Historic data show the peak time for selling homes is April through July, and that means this is the month for spring cleaning.
"Freshen up the landscape and add that mulch now," Dallas Realtor Jeff Duffey recommended in a phone interview. "Get your over-sized furniture out of the small bedroom and put more lamps in that dark room."
The economy has a lot riding on how well people obey Duffey's marching orders.
Economists say a strong housing sector can drive job creation, as well as boost personal wealth and consumer confidence. Here are a few reasons for optimism, based on reports issued in last week:
- Sales of new single-family homes unexpectedly shot up nearly 10 percent in January to a five-and-a-half year high, according to Commerce Department data.
- The Pending Home Sales Index, compiled by the National Association of Realtors, showed that contract signings ticked slightly higher in January.
- The Reuters/University of Michigan Consumer Sentiment Index, which measures how confident people are about the economy, managed to inch up 0.4 points in February.
But while those are good signs, Realtors' chief economist Lawrence Yun is still being restrained in his assessment of this year's prospects. Because many builders got knocked out of business during the recession, new home construction has been subdued in recent years, creating inventory shortages and price jumps. Yun says that has been a problem, along with poor weather conditions in much of the country this winter.
"Ongoing disruptive weather patterns in much of the U.S. inhibited home shopping," Yun said in a statement. "Limited inventory also is playing a role, especially in the West, while credit remains tight and affordability isn't as favorable as it was a year ago."
This year, existing-home sales are projected to hit just over 5 million, which would be slightly below last year's level. Yun forecasts that the national median existing-home price will increase by between 5 percent and 6 percent this year.
But a major housing report just completed for the Conference Board — a business group — is less optimistic about home prices. It forecasts "existing single-family median home prices to grow at an average annual rate of 2.1 percent between 2015 and 2018."
The sooner the housing market returns to a healthy and stable state, the better for the economy, analysts say. For one thing, a strong real estate market can create jobs for home builders and remodelers. In January, the residential construction sector added 13,000 jobs.
Better home sales can also improve the prospects of all types of job seekers, according to John Challenger, CEO of Challenger, Gray & Christmas, Inc., an employment consulting firm.
During the worst of the housing bust, "many job seekers were stuck in homes with market values well below what was owed on the mortgage," Challenger said. "In 2013, we saw a rebound in home buying and home prices. Fewer mortgages are 'under water,' which is making it easier to move."
PNC Financial Services' chief economist Stuart Hoffman wrote an assessment, ticking off reasons why the housing sector should hold up in 2014.
"The economy is adding jobs and incomes are growing, making households more confident," Hoffman wrote. "Big gains in stock prices over the past few years have boosted household wealth, and banks are gradually more willing to lend. There is also significant pent-up demand for new homes after potential buyers have put off purchases for years because of concern about the economy."
Realtor Duffey says he is feeling "super optimistic" because he already is seeing "buyers are fighting over homes" amid lean inventories.
Still, he warns that sellers should not become overly confident. Would-be buyers still have the option of renting if they don't like what they see.
"You need to spend $2,000 to $4,000 getting your house ready for the market, no matter what your price range is," he said.
When he meets with potential sellers, they often apologize for the state of their homes. He then delivers a lecture on the importance of spring cleaning. "They have Cheerios on the floor – and I know, that's how people live in real life, but that's not how you sell homes," he said.