NATICK, Mass. --(BUSINESS WIRE)-- The federal tax credit extension, coupled with an uptick in seasonal buying, helped keep the real estate market on its tracks in the first two quarters of 2010, according to the RE/MAX of New England 2011 Housing Market Outlook and Forecast*. Single-family home sales across New England showed the affects of the tax credit extension, as first-time buyers inked deals to beat the spring deadline.
As predicted, the second half of 2010 did not fare as well despite mortgage interest rates hitting historic lows - at times dipping into the 3% range. "The stalled third and fourth quarters have everything to do with lower consumer confidence due to our struggling job market," said Jay Hummer, Executive Vice President and Regional Director of RE/MAX of New England. "We've seen a nationwide trend of companies accumulating cash and reducing debt by not hiring additional personnel." According to a report from Moody's Investors Service, an estimated $943 billion has been accumulated as cash reserves by U.S. non-financial corporations, primarily in the technology sector.
In an effort to stimulate the economy, the Federal Reserve recently announced a second purchase of $600 billion in long-term Treasury bonds; an attempt to speed up economic growth by further lowering long-term interest rates. "With rates continuing on a steady trajectory, it's really an investor's market," said Hummer. "There is no other industry right now in which you can expect 80% return on your investment. Consumers who are able to put 20% down, rent a property and in 20-30 years time own it, will realize that return."
Despite recent data by the S&P/Case-Shiller Home Price Indices that shows broad-based declines in the values of home prices in the third quarter of 2010, some New England states are bucking the national trend.
Rhode Island, which has the highest unemployment rate, at 11.6%, in New England and the fifth highest in the nation, showed average price increases in homes across the board. Single family homes were up 11.2% from $243,968 in 2009, to $271,244 in 2010. Condominium prices increased 10.1% from $214,116 in 2009 to $235,735 in 2010. Multifamily home prices showed the highest gain from $114,131 in 2009 to $137,451 in 2010; a 20.4% increase, clearly showing the affects of investor-related buying.
In Massachusetts, where the unemployment rate of 8.2% sits below the national average, home prices showed marked increases, as well. Single-family home prices were up 7.2% from $351,788 in 2009 to $376,970 in 2010. Condominium prices increased 9.3% from $305,937 in 2009 to $334,343 in 2010. Multifamily home prices showed gains of 14.0% over 2009, with average prices increasing from $226,535 to $258,322.
In Connecticut's affluent Fairfield County, single family and condominium prices also increased in 2010. Single-family home prices were up 13.8% from $547,259 to $622,547 in 2010. Condo prices rose from an average of $277,821 to $288,924, a 4% increase over 2009 prices. Multifamily homes largely stayed the same, posting a small drop of -0.4%.
As anticipated, overall home sales in 2010 were down versus 2009. Across New England, single family home sales dropped an average of –5.0%; condominium sales showed an average decrease of -2.8% and multifamily homes showed the highest decrease in sales at -9.7% on average.
With more Americans underwater on their mortgages, foreclosure activity signs point to marked increases in 2011. Third-quarter foreclosures in 2010 jumped by more than 30% with bank regulators stating that many lenders have simply exhausted options for keeping delinquent mortgagees in their homes through government programs including loan modifications. In fact, according to the Office of the Comptroller of the Currency and the Office of Thrift Supervision's quarterly mortgage report, more than 380,000 new foreclosures were initiated nationwide in the third quarter of 2010. That makes the number of in-process foreclosures close to 1.2 million, nationally, a 10% increase over 2009.
"More foreclosures in the market will absolutely affect the timeline to an industry recovery," said Hummer. "Purchasing a foreclosed property also takes anywhere from six to 12 months and even with conservative estimates, we won't see a turnaround until at least 2013. That's why it is so critical that investors ramp up activity now."
Another area that bears watching, according to Hummer, is adjustable rate mortgage resets. For the estimated hundreds of thousands of Americans who chose this option their rates will soon jump up into the double-digits, creating payments that they simply cannot afford.
Jay Hummer, Executive Vice President and Regional Director for RE/MAX of New England has more than 25 years of experience in the real estate franchise industry, beginning his career in New York City in 1984. In his role, Hummer oversees 234 offices and nearly 3,000 sales associates throughout Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. In the past 12 months, RE/MAX has added 29 new Franchises throughout New England. RE/MAX is the most recognized name in real estate.