One of my biggest concerns for duplex sellers as we head into 2013 is what’s been driving rising prices in our market recovery.
Prices are up thanks to two factors: low interest rates and scarce inventory. If either of these variables change significantly, so too will the market.
Fitch Ratings agrees. According to a recent report, they have seen housing and duplex prices rise at their greatest pace since 2005. They believe this is the result of technical factors (supply and interest rates), rather than fundamentals like employment and wage growth.
The reporting agency also believes market stabilization is contingent upon the pace of distressed sales and foreclosure liquidations. The slower the pace of foreclosures, the longer it will take for a real estate market to be sustainable.
For some states, the foreclosure process can take as little as 90 days (Texas) and for others, an average of 1,019 days (New York).
If banks continue to sell off inventory at their current pace, it is estimated it would still take 34 months before they cleared their backlog of delinquencies.
Sellers should celebrate a rebounding market, but know there may be a wave of inventory on its way from both banks and other traditional sellers anxious to make a change in their life.
Of course, increased inventory may have a negative impact on price; especially since the economy has yet to experience the kind of job growth necessary for a complete recovery.
In other words, it’s a great time to sell, but it may or may not be three months from now.