March 15, 2013 - These days, you might be surprised to receive a call from a realtor looking to sell your house -- even if it's not on the market. Mary Beth Harrison, a Dallas real estate agent, has been scouring tax records and contacting homeowners with lots of equity in their homes in the hopes they may be persuaded to sell. "That's how hot things are now," she told Bloomberg.com contributor Carla Fried when Fried wrote recently about the spring home-selling season.
Analysts agree the housing market is getting feverish. In a report titled "Florida Is On Fire," John Burns Real Estate Consulting notes home prices in Orlando and Naples are rising 1 to 2 percent per month. House hunters are being attracted by homes that are, all in all, more affordable than many have ever seen.
Because of low interest rates and previous home price declines, Burns estimates homebuyers’ monthly mortgage payments, as a percentage of median income, are lower than they've been in 32 years, at least in Florida. Moreover, homebuyers now think real estate is a good investment. In a Fannie Mae survey, 48 percent of respondents predict higher home prices over the next year, while 10 percent believe prices will decline. That creates "momentum in home prices," says Bank of America Merrill Lynch U.S. economist Michelle Meyer. Higher prices also mean easing credit conditions for mortgage seekers, she says.
For those thinking they can profit from the rising housing market, be aware that there are plenty of pitfalls for amateurs. In a study published in December, researchers demonstrated how bad we are at predicting how other buyers and sellers will behave.
In five different behavioral experiments, the study found buyers tend to overestimate how much other buyers will pay, while sellers underestimate how much other sellers will accept. In a busy market, that means buyers are in constant danger of paying too much, while sellers are always tempted to sell too cheaply. Boston University marketing professor Didem Kurt, who co-authored the study, says buyers and sellers shouldn't forget that their competitors are often in similar economic situations, feeling "a comparable amount of pain."
Fried offers other "winning strategies for the spring housing scrum" here.
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