RISMEDIA, May 5, 2010—Point2 Technologies recently released the results from its Real Estate Confidence Index (RECI) survey for the month of April that indicate improved market conditions and forward looking sentiment amongst real estate brokers and agents around the United States, with uncertainty over the longer term weighing in on the Index.
The RECI, a real estate market leading indicator that tracks broker and agent forward looking confidence and market opinion nationwide rose for the second month in a row.
For April 2010, the RECI recorded a 5.82 (+0.87 %) reading on the RECI scale of 1-10 (1 being ‘bad’ and 10 being ‘good’), up from 5.77 in March (+2.49%).
March results were underscored by a jump of 27% in new home sales for that month, as reported by the Commerce Department, and a 6.8% rise in existing home sales, according to the National Association of Realtors’ report.
The Current Sentiment variable within the RECI, one of three components that make up the monthly Index, rose to 5.30 (+5.16%) for the April period. Positive sentiment amongst survey respondents was fueled by improved current market conditions, with increased sales activity in the low to mid price range properties category remaining the common denominator.
RECI survey participants pointed to the looming tax credit expiry on April 30, 2010 as the key driver for increased sales, with more agents in more states including Florida, California and Hawaii reporting multiple offer and bidding war occurrences than the month before. Some sales professionals also cited increased investor activity.
The current federal government program offers home rebates of U.S. $8,000 for new home buyers and US $6,500 for existing home buyers when moving up.
Lack of sufficient inventory in the lower, active price categories in several of the ‘hot’ markets was seen as a key issue that could be inflating prices. A number of respondents indicated that more foreclosure inventory is likely being withheld by the banks and is expected to go on the market in the future, which in turn respondents anticipate will apply renewed downward pressure on prices.
More positive sentiment and feedback were offered in the April survey than in prior months, out of recently challenging markets, including Michigan. “Closed sales up 50% for 1st quarter 2010 vs. 2009 in South West Michigan.” “Prices have flattened out, under 100K market is becoming a seller’s market with multiple offers. Things are looking better than they have for over two years.” “Homes are having multiple offers and at the listing price almost.”
Nevada agents were also more upbeat. “Lots of activity even if prices not moving up. Not moving down either. Existing home sale up significantly.” “Residential real estate is undervalued in Nevada, prompting buyers/investors to be very active.” “We’re seeing record sales in our office and think it will continue.”
Other positive signs include some reporting of more activity in higher price range properties, in several states, a category almost completely bypassed in RECI respondent feedback since the Index debuted last summer.
Notably, uncertainty regarding the market’s prospects following the expiry of the current incentive program was predominant in the April survey and was reflected in both Short Term (3-6 months) and Long Term (12-18 months) broker and agent optimism/pessimism RECI component ratings, with both retreating versus the previous month.
The drops pressured the overall Index, with the prevalent respondent concerns being uncertainty over the market’s reaction following the expiry of the tax credit program; the risk of interest rate hikes; and, pressure anticipated from additional foreclosure inventories.
Key issues also included persistently tight lending practices and slow approvals, both seen as major hurdles to the efficient absorption of REO and foreclosure inventory, and to a sustained market recovery.
The RECI’s Short Term (3-6 months) variable regressed marginally to 5.74 (-0.35%) on the 1-10 scale, and the Long Term (12-18 months) indicator moved back from 6.51 to 6.43 (-1.23%).
Colorado, Georgia, Illinois and Indiana, amongst a number of other markets continued to experience abundant bank owned and foreclosure property inventories, which pressured prices and sentiment in those states.
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