Interested in becoming a real estate broker? Better get your license soon. The housing market is flush with momentum, but as commodity inflation rears its ugly head in the economy, the Federal Reserve this past June 30 increased interest rates for the first time in four years, an about-face in policy. As pressure mounts over the coming months for the Fed to raise rates further on a measured basis, we may begin to see Americans who have been procrastinating decide that they should jump to action and purchase a new residence while the rates, albeit higher, are still at historically low levels.
In May 2004, Americans bought both newly constructed and existing homes at a record level of 8.17 million* units. Most of this growth derived from the increase in May of existing home sales. A pace of 6.80 million* existing homes changed hands, exceeding May 2003 figures by almost 16 percent, and eclipsing the previous one-month home sales record set in September 2003. Another promising indicator from May 2004 is an increase of more than 10 percent in median home price over May 2003. This is evidence that not only are people buying homes, but that demand in the market is strong enough to command premium asking prices. As each sales record is shattered, and prices maintain an upward trend, the smiles on the faces of real estate brokers will be hard to ignore.
The happiest brokers hail from the South and West the Sun Belt states. The two warmer climate regions combined saw existing home sales in May jump by 4.5 percent, while the Northeast and the Midwest fell by 0.9 percent.
This regional disparity seems as if it's going to continue to prevail. In order to verify this theory, we teamed up with Synovate's eNation online polling system in June in an Internet-only survey of 1,277 people on the subject of their plans to move. Our analysis reveals that the real estate market may still have room for growth, as 13 percent of all the participants said they were planning to move in the next year, while another 15.5 percent said they may not move in the next year, but are planning to move at some point. As we'd expect to find, almost twice the number of younger respondents said that they plan to move compared with the national average: More than 50 percent of 18- to 24-year-olds said that they plan a move. Contrast that with 87 percent of respondents aged 65 or older who said that they plan to stay put.
We also queried why people plan to move or to stay at their current residence. The No. 1 reason with 47 percent of respondents was a desire to live near their families. You might think it strange, but our results show that 54 percent of 18- to 24-year-olds who plan not to move in the near future cited wanting to remain close to family as the top reason. Even more strange, we found that 40 percent of 55- to 64-year- olds who plan to stay where they are said the main reason for standing still is not to be close to kids and grandkids, but the weather.
Weather might well act as inducement to hunker down I like the change in seasons but employment comes up most often as the principal reason our respondents do or will plan to move. More than 1 in 4 respondents who indicated a plan to move said they were doing so for job-related reasons. This figure increases if there are children present in the home, as 34 percent said they were moving for employment. While jobs may provide the rationale for moving, getting a job no longer necessitates moving to a big city, or to a city of any size. Almost three quarters of respondents said they plan to move to the suburbs, the country or a small town, while the other 25 percent plan to move to a small or major city.
What does this mean for real estate companies? For the industry as a whole, it means that an increase in interest rates may have a dampening effect on the hot real estate market, but 2004 is already on pace even with a speculated decline in the second half to be a record-breaking year. For realtors in places like Los Alamos, N.M., located in the Santa Fe MSA, which has seen over 8 percent growth in the number of households from 2000 to 2004 and is projected to have more than 10 percent growth over the next five years according to Claritas Inc., it means that they are most likely going to be very busy over the next few months if not years. For other realtors, like the ones in Lockport, N.Y., in the Buffalo MSA, which has lost 0.66 percent of its households since 2000 and is projected to lose another 0.98 percent over the next five years, it might mean it's time to follow the crowd going south or consider going into a business providing geriatric services.