What the Housing Market Is Signaling Now


Last week, we got some good news: Home prices in most major metropolitan areas are starting to stabilize. A report from the National Association of Realtors (NAR) showed that 78 markets in the U.S. experienced price gains in the fourth quarter of 2010 over the previous year. Existing-home sales were up as well, rising 15.4% to an annual rate of 4.8 million from 4.16 million in the third quarter of 2010.

This wasn't a total improvement over 2009 -- prices are up 0.2%, however the fourth quarter of that year saw an annual rate of 5.97 million sales, largely due to the first-time home buyer tax credit -- but it's certainly progress.

Here's what that means for the average consumer:

A Slow Improvement
These are not great gains, and in fact, only half of the markets saw improvements, which means -- say it with me -- half did not. But it does mean we're inching in the right direction, and we should continue to see more growth as the year goes on.

A Heads Up for Buyers
If you're in the market for a home, you need to be paying attention to these numbers. "If I were thinking about buying, I would want to have some perspective about where prices were headed. If they're starting to accelerate, you might want to act. If there's been a decline, you have to realize that there are opportunities out there to shop and find a real bargain," says Jed Smith, the managing director of quantitative research at NAR. Chasing the bottom is never a good idea -- no one knows when it will hit-- but if you've been holding out and prices have shown signs of increasing in your area, you probably want to get serious.

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Another Chance for Sellers
If you've been waiting to put your home on the market -- or you had it on, but took it off because it just wasn't moving -- we may be inching toward a time when you can put it up for sale and recoup at least some of the value it lost during the recession.

It's Not a Store-Wide Sale
Real estate is extremely local, not just by state or city but by neighborhood, and in some cases, even by block. That means you really have to track your immediate area if you want to follow prices and sales data carefully. You can find out hyper-local information from a local real estate agent, one of the perks of working with one to find a home. But this national data from NAR tells you one thing: You're not going to find bargains in every market. "Everyone thinks that everything is on sale. It really isn't, and if you're going to make a realistic offer, you need to take into account whether prices are going up rapidly, stabilizing, or going down in your specific area. If prices are going up, a low-ball offer isn't going to work. If they aren't, you need to recognize that it might be a good time to buy a house," says Smith.

The Economy Is Improving
The jobs situation, in particular, which I wrote about last week, is looking better. We're adding jobs slowly -- too slowly for the kind of rebound we need -- but these NAR figures are promising. The unemployment rate in any given area tends to correlate very closely with home prices, explains Smith. "When the economy is generating jobs, and there are areas where jobs are being generated, home prices in those areas tend to be headed up. When the economy is holding constant, prices tend to be relatively stable. And where there are job problems, prices may be weak or headed down in some cases."

In NAR's release about these new numbers, Lawrence Yun, the association's chief economist, says that the housing recovery will mean faster job growth. He projects that 150,000 to 200,000 jobs will be added to the economy in 2011 from an anticipated 300,000 additional home sales.