MARKET TRENDS: Americans Increasingly Optimistic About Housing

While the greater American economy has been slowly lifting itself from the recession, the housing market has been particularly slow to turn around. Fortunately, 2012 was an exceptionally positive year for the housing market, and the property sector has become one of the fastest-growing segments of the American economy. In fact, the housing market’s rebound has become so assertive that certain reports indicate housing’s advance has become a growth engine for the economy as a whole. One of the accumulated positives of all this, it seems, is that the American public has become increasingly confident about the housing market’s future as well.

According to new reporting from Bloomberg, Americans are overwhelmingly certain that the property sector will undergo substantive improvement by the close of 2013. As the article notes, those polled believe that the housing market will improve within the next year by a three-to-one margin. While 31% of those polled expressed ambivalence about the housing market’s prospects, a full 50% believe the housing market would improve over the next twelve month against only 16% of those who foresaw negative returns for housing. With metrics derived from a Bloomberg National Poll, statistical analysis points towards a sea change in the public’s attitudes towards the real estate sector.

It’s naturally pleasing to hear that consumer confidence is returning in a big way. However, do the harder statistics validate this newfound positivity? As the Bloomberg report notes, the Commerce Department’s figures for new construction are outstanding. January returned the highest volume of initiated building projects since July 2008, with homebuilders beginning work on a sum 613,000 single-family homes. Housing values have also been rising substantively as well, with one of 2012’s greatest economic victories being the price recovery of large swaths of American property. As I noted in a previous post, much of this can be credited to the rapid purchase of otherwise neglected property working wonders for the supply-demand equation.

Theses are all constructive developments, especially considering that housing’s bubble bursting was held as the epicenter of the financial crisis. Many Americans felt rightly burned

SELLING YOUR HOME: Is There a Window of Opportunity for Sellers Right Now?

One of the most interesting revelations of the latestNational Association of Realtors (NAR) Existing Home Sales Report is the shortage of housing inventory being reported throughout much of the country. At the same time, buyer demand is dramatically up over last year.  Here are some key points:

• Total housing inventory at the end of January fell 4.9 percent to 1.74 million existing homes available for sale, which represents a 4.2-month supply at the current sales pace.
• This represents the lowest housing supply since April 2005 when it was also 4.2 months.
• Listed inventory is 25.3 percent below a year ago when there was a 6.2-month supply.
• Raw unsold inventory is at the lowest level since December 1999 when there were 1.71 million homes on the market.

What Does This Mean if You Are Selling a Home?

The price of anything is determined by supply and demand. According to NAR’s report, inventory is at its lowest level since the real estate boom eight years ago. At the same time, demand is up. Lawrence Yun, NAR chief economist, reveals:

“Buyer traffic is continuing to pick up, while seller traffic is holding steady. In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly. We’ve transitioned into a seller’s market in much of the country.”

Does that mean you should sell your house now? Or should you wait to see if prices increase? Nobody knows for sure. However, some feel that there may be a pent-up inventory about to come to the market because, as prices increase, it will free up some sellers who have been locked in a negative equity situation (where the house is worth less than the remaining mortgage).

The Zillow Negative Equity Forecast predicts: 

“The negative equity rate among all homeowners with a mortgage will fall to at least 25.5

Survey: Single-Family Renters More Likely to Stay Longer

Renters who opt for single-family homes over apartments are more likely to live in those homes for five years or longer and more interested in ultimately becoming a homeowner, according to a study released Monday.

Some 26% of single-family-home renters said they planned to live in their current rental for five years or more, compared with 22% for renters in multifamily buildings. Three out of every five single-family renters also said they planned to become a homeowner within five years, compared with just 44% of apartment renters.

More than 14 million renters live in single-family homes in the U.S., but over the past year the sector has received much more attention from private-equity funds and other institutional investors looking to build large pools of rental homes by purchasing foreclosures and other distressed properties at fire-sale prices.

While some critics have questioned the ability of these firms to effectively manage hundreds or thousands of single-family homes scattered across a city, the lower turnover of single-family tenants could help reduce costs for landlords.

The survey, conducted by ORC International for Premier Property Management, also found that a majority of apartment and single-family renters indicated that they rent because they

MARKET TRENDS: Six Reasons Housing Inventory Keeps Declining

Home sales in December dropped by 1% from November, the National Association of Realtors reported on Tuesday, but still stood nearly 13% above the levels of one year ago. That means home sales have risen from the year-ago month for 18 straight months.

For 2012 as a whole, sales were up 9% to 4.65 million units, the highest annual total since 2007.

Prices, meanwhile, are picking up because the number of homes for sale continues to drop despite the sales volume gains. The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November and a 21.6% decline from one year earlier, the Realtors’ group said on Tuesday.

Here’s a breakdown of why inventory has continued to drop this year:

Many homeowners are underwater: More than 10 million homeowners owe more on their mortgage than their homes are worth, according to CoreLogic Inc. CLGX +0.61% That pencils out to around 22% of homeowners with a mortgage, or 15% of all homeowners (since not every homeowner has a mortgage). Underwater owners aren’t likely to sell unless they need to move due to changing life (marriage, divorce) or financial circumstances, and they’ll take a hit on their credit for pursuing a short sale, where the bank allows the home to sell for less than the amount owed.Data from CoreLogic show that inventory has been the most constrained in housing markets where there’s the largest concentration of underwater borrowers.

Others don’t have enough equity to “trade up”: Another 10 million homeowners have less than 20% equity in their current residence, meaning they can’t easily “trade up” to their

BUYING A HOME: Don't Let House-Hunting Break Your Heart

This time of year love is on the minds of many. For those who are house-hunting, it can be a whirlwind romance that's hot from the minute you see the home's curb appeal. But don't let the seduction of a good-looking landscape make you want to tie the knot without a bit of courtship.

Keeping these terms clearly defined and always on your mind will help you make smart choices even when some areas of the home tug at your heartstrings and say "buy me!".House-hunting for the "perfect" home in many ways is like looking for that perfect romance - very seldom does everything about your proposed mate match your desires. Things you love at first may later get on your nerves and become what you don't like so much later on. Does that mean the house is wrong for you? Not necessarily. It could be, but if you understand your tolerance level–what's most important to you in a home, and what you can't deal with at all - you are less likely to want to buy the wrong home.

House-hunting should be like dating. Take your time. Understand the critical must-haves, the not-so-important-but-I-kind-of-want-it, and the no-way, not-going-to-happen-in-this-lifetime.

One thing you can do to help streamline the process is to start making a list about the things you like about your current home. If you're renting, there may be features about the home, apartment, or planned-living development that you want to find again in the neighborhood where you're going to buy your home.

For instance, you might want a gated community or a townhouse that has certain luxury amenities. Moving to an isolated home that doesn't have the same type of amenities could be a real turn-off. Also, it might mean you have to pay more to get those same amenities that used to

BUYING A HOME: Seasonal Flip-Flop Hallmarks Housing Recovery, Tough Times For First-Time Buyers

Just as home price gains are moving up against the traditional seasonal grain, inventories are going down at a time when they typically turn up.

A new report by Movoto.comreveals the housing inventory is down to its lowest point in three years.And that's bad news for homebuyers, especially first-timerstrying to take the plunge.

Across Movoto's 34-city tracking area, inventories of homes for sale in January dropped to 88,000, down 19 percent from December and 47 percent off the 2010 peak.

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Meanwhile the monthly list price per square foot increased from $169 in December to $173 in January, $155 a year ago and $162 two years ago.

By Movoto's measure, homes on the market today are more expensive they they've been for the past two years.

Graphs by Movoto Real Estate

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Among the top 10 major metros with the greatest year-over-year drop in inventories, 7 are in California.

The top 10 cities in Movoto's coverage area with the greatest decline in homes for sale, along with the decline by percentage, are:

Sacramento - 75.11 percent
Oakland - 66.77 percent
San Francisco - 61.41 percent
Long Beach - 56.19 percent
San Diego - 49.34 percent
Los Angeles - 48.68 percent
Fresno - 47.62 percent
Portland - 43.18 percent
Denver - 39.02 percent
Houston - 35.02 percent

Movoto says inventories are inadequate for a host of reasons and those reasons are squeezing first-time home buyers out of the market.

• Equity is on empty - With insufficient equity to sell homes at a profit, homeowners are sitting tight. Only those who are struggling and unable to get a workout are forced to sell - at a loss. Until the market returns sufficient equity to these homeowners, they are going nowhere fast.

• Catch 22 - Homeowners who can sell at a profit are afraid they won't be able to purchase a decent move-up, -over, or -down home.

"Remember standing around at the high school dance wondering who's going to be first to ask

HOME DESIGN: Kitchen Trends for 2013

From a home buyer’s or seller’s perspective, it’s important to know the popular kitchen trends for 2013.  The kitchen is often the hub of most activity in the home, so it stands to reason that this room ranks high in importance among potential buyers.  Buyers are drawn to homes with an updated kitchen; if you’re selling, look for kitchen remodel ideas that will increase the value of the home while staying within budget.

• An open, airy kitchen, with simplified lines is a big draw.  One of the hottest kitchen trends for 2013 is modern style, with big open spaces where homeowners can entertain friends and family in an atmosphere that features clean, inviting simplicity.  Large kitchen islands are part of this trend, and as dining rooms become less popular, a supersized island with bar stools can offer a great space for eating, drinking, and socializing.
• Appliances should be upscale, but unobtrusive.  As more people become interested in gourmet cooking, upscale appliances are increasingly popular.  A professional gas range or induction stovetop can greatly add to the value of a home, but at the same time, most buyers prefer appliances that blend in with the kitchen.  Some appliances can be hidden in a kitchen island, and another of the kitchen trends for 2013 is appliances designed to match the wood grain of the cabinetry.
• Lighting is an important part of a kitchen’s appeal.  Whether it’s task-oriented or ambient, lighting factors into a kitchen’s charm.  Using under-cabinet LED lights is a great way to bring more light into the kitchen in an energy-efficient way, yet is among the more cost-effective kitchen remodel ideas.
• Kitchen trends for 2013 include some fresh ideas for decorative touches.  Neutral colors—particularly grays, greens, and wood tones—are popular, with bright colors used only for accents.  Range hoods are becoming more decorative than utilitarian, and can almost resemble a decorative chandelier.  High gloss is huge, with back-painted glass

MARKET TRENDS: Video - Housing Market Makes Comeback, End to Foreclosure Crisis in Sight

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THE ECONOMY: Krugman Says Fed Low Rates Key to Housing Rebound: Tom Keene

Nobel Prize-winning economist Paul Krugman said the Federal Reserve must keep interest rates low to sustain the U.S. housing recovery.

“We have the beginnings of a housing recovery, it’s just starting to kick in,” the Princeton University economics professor said in an interview today on “Bloomberg Surveillance” with Tom Keene and Sara Eisen. “If the Fed were to raise rates, they would kill that.”

Central bank policy makers have said they will keep their benchmark lending rate near zero as long as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent. U.S. unemployment rose to 7.9 percent in January, even as the economy added 157,000 jobs.

The housing market has been a bright spot in the economy, with housing starts rising 12.1 percent in December to cap the industry’s best year since 2008.

Krugman called the housing recovery the “best chance” the U.S. economy has to expand. The U.S. should have learned from Japan, which “repeatedly aborted its recovery by tightening too soon” during that nation’s own crisis.

The U.S. is already five years into a crisis that mirrors the Asian nation’s so-called “lost decade,” Krugman said. The period in the 1990s saw Japan’s economy slip in and out of recession and grow at an average rate of about 1 percent a year after the collapse of a real-estate bubble.

Like Japan
“We already are Japan-like, we’re worse than Japan ever was,” he said. “The human misery here is much worse than Japan has ever suffered.”

He said the U.S. needs to build infrastructure and that it is acceptable to pump money into the

LOCAL HOUSING NEWS: Residence tower at TD Garden is OK’d

The Boston Redevelopment Authority has approved construction of 38-story residential tower behind the TD Garden that will include more than 500 apartments, restaurants, and stores.

AvalonBay Communities Inc. will build the tower on Nashua Street, filling empty space between the Garden and the Charles River. The $200 million project, approved by the BRA board Thursday night, also includes construction of a two-story retail arcade that will connect the new tower to Causeway Street and North Station.


Executives with AvalonBay have said they hope to start construction this fall.

“We believe the West End neighborhood and, in particular, North Station, has tremendous potential to become a true nexus within the city for residents, commuters, and others,” said Scott Dale, AvalonBay’s senior vice president of development.


The project is one of several large developments expected to transform the area around the Garden in coming years with more than 1,800 new residences, hotels, office buildings, stores, and restaurants.

Converse Inc. recently committed to move its corporate offices into a large new development at nearby Lovejoy Wharf, and Stop & Shop and Target are considering new stores in a pair of towers being planned in front of the Garden by Boston Properties and Delaware North Cos.

The AvalonBay project, called the Nashua Street Residences, will include a mix of studios, one-bedrooms, two-bedrooms, and 32 three-bedroom units. The development also includes 219 parking spaces and a terrace on the 35th floor with views of Boston Harbor and the downtown skyline.

In other business Thursday, the BRA also approved plans for a 177-room hotel in East Boston and construction of a 10-story academic building in Government Center by Suffolk University.

The hotel, to be constructed at the corner of William F. McClellan Highway and Boardman Street, will rise to five stories with an adjacent 346-space parking lot. The project also includes

BOSTON HOUSING NEWS: Residential tower pitched for the Fenway

For years, the gritty retail building at Brookline Avenue and Boylston Street has remained a bystander in the Fenway’s revitalization.

Not anymore.

Developer Samuels & Associates proposes building a 22-story residential tower on the property that would contain 320 residences and a two-story retail base with several new shops and restaurants.

The project, to be called The Point, would result in a modern masonry and glass tower on the triangular lot currently occupied by a D’Angelo sub shop and other businesses. Samuels filed plans for the project Friday with the Boston Redevelopment Authority, kicking off a monthslong review.


The building’s construction would continue a decadelong remake of the Fenway portion of Boylston Street, where Samuels and other developers have already built hundreds of new residences, restaurants, and retail shops.

“This counts as among the most exciting of our projects in the Fenway,” said Peter Sougarides, a Samuels & Associates executive. “In the almost 15 years that we have been working with the neighborhood, this property has always been thought of as a gateway into the Fenway and a key element of the redevelopment of Boylston Street.”

Samuels is currently building the nearby Fenway Triangle project at the corner of Boylston and Kilmarnock streets. That $325 million project will result in new offices, 172 residences, a Target, and several smaller retail shops and restaurants.

Designed by the architecture firm Arquitectonica, The Point would be the most visually striking of the buildings Samuels has developed so far. A rendering shows a wedge-shaped glass tower rising above a two-story base with restaurants and stores.

The windows on its north face would be layered so it looks like a series of glass doors are sliding into one another. In its filing with the city, Samuels said the building is meant to shake up

ARCHITECTURE: A Real Life Digital Architect - Digital Architect Video

MORTGAGE: 30-Year Fixed Mortgage Rates Continue to Rise

SEATTLE-Those who follow @GlobeStcom on Twitterand @GlobeStLIVE may have seen a post teasing the announcement, but GlobeSt.com has learned that the 30-year fixed mortgage rate on Zillow Mortgage Marketplace is currently 3.44%, up two basis points from 3.42% at this same time last week. The 30-year fixed mortgage rate hovered between 3.43% and 3.48% for the majority of the week, according to a statement from the company.

Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgage Marketplace site. The rate for a 15-year fixed home loan is currently 2.7%, while the rate for a 5-1 adjustable-rate mortgage is 2.35%.

According to Erin Lantz, director of Zillow Mortgage Marketplace, “Despite an unexpected increase in the unemployment rate, rates ended the week essentially unchanged.”

Lantz expects that rates will remain fairly flat in the coming week “with limited economic news that might change the consensus that the economy is recovering, but at a slow and cautious pace.”

Check out the below chart for 30-year fixed mortgages by state.

And in other Zillow news, the company just launched an app to help with home improvement called Zillow Digs, where home shoppers and homeowners can find visual inspiration and understand the real cost of remodeling projects. According to Zillow, users can browse tens of thousands of photos and see Zillow's proprietary Digs Estimates for the estimated cost, based

MORTGAGE & FINANCE: Fee increases are making FHA mortgages more expensive

WASHINGTON — If you want to buy a house with minimal cash by using an FHA-insured mortgage, here's some sobering news: Because of an ongoing series of fee increases and underwriting tweaks, those mortgages are getting steadily more expensive and may not work for you.

The Federal Housing Administration is the largest source of low-down-payment mortgage money in the country. Its minimum down is just 3.5%, compared with 5% to 20% or more from conventional, non-government sources. For decades, FHA financing has made homeownership possible for first-time buyers with modest incomes and credit history blemishes.

But in the wake of losses tied to bad loans insured during the housing bust years, the FHA has been raising its loan insurance fees and backing more loans to applicants with higher credit scores. With the latest increases, things have gotten to the point where some lenders wonder whether the agency is trying to move away from its traditional customers.

Dennis C. Smith, broker and co-owner of Stratis Financial Corp. in Huntington Beach, is blunt: "I think FHA is putting itself out of business with the moves they've made in the past couple of years."

Although they wouldn't agree with that assessment, the FHA's top officials readily admit that their priority is not increasing market share but protecting the agency's multibillion-dollar insurance fund reserves and cutting losses.

Starting April 1, the FHA's annual mortgage insurance premiums for most new loans will jump

FINANCE: Lenders react to FHA mortgage insurance changes

Not only will FHA Mortgage Insurance Premiums be increasing 10 to 15 basis points, but they will also become permanent, creating room for alarm among lenders who fear lower-income homeowners will be squeezed out of the market.

U.S. Federal Housing Commissioner Carol Galante announced the changes in late January.

Many are arguing that, for a loan designed to help lower-income families and first time homebuyers, this increase in premiums is unjust, according to a recent press release.

"If Commissioner Galante follows through with other items, such as permanent mortgage insurance, low income households will qualify for less," said Chris Apodaca, a California mortgage banker.

And reducing market share is partially a goal of the increases, according to the FHA. It's role, post-crisis, is huge. Accoring toan article in The Wall Street Journal, economists at Moody's Analytics estimate that home prices, already down around 30% from their peak, would have fallen by an additional 25% without this government backing.

Therefore, it will be difficult to claw-back from the role the government plays in today's housing finance.

"FHA was never meant to be as mainstream as it is today," Apodaca added.

Seattle’s inventory of homes for sale has been dwindling for the past year. However, it seems that sellers are still in hibernation, despite the lack of competition from other sellers. This lack of inventory continues to leave buyers frustrated.

Last month, a 1.39-month supply of housing was reported in Seattle's King County. Analysts suggest a 5-to-6 month supply indicates a "balanced market."

"60% of homes being listed in the major job centers of the greater Seattle area are selling in one month or less," reported Seattle Pi.

While some sellers may be waiting for the market to come back, the Seattle Pi article points out, "the market is back."

Economists are saying that housing will become a positive contributor to the U.S. economy in 2013, instead of weighing against economic growth.

According to an article in The Columbian, this statement is backed up by most measurements of the housing sector, including home starts, sales and rising home prices. 

"The current forecast is for 5 million existing homes and 500,000 new single-family (housing starts). That's a pretty healthy growth in existing sales of about 8.5 percent," said Danielle Hale,

THE ECONOMY: Big money betting big on housing

Hedge funds and private equity firms have been rushing in to buy up companies and assets in every part of the housing supply chain, including undeveloped land, homebuilders, foreclosed homes, and building parts manufacturers.

One of the most notable moves is coming from hedge fund manager John Paulson, best known for his big (and lucrative) bets against subprime mortgages in 2006 and 2007.

Now, he's turned his attention to snapping up undeveloped land in areas hardest hit by the housing crisis. "Land is the accordion in the home building equation," said Michael Barr, who runs Paulson's real estate investments. "It falls the most in a downturn, but also rises the most in an upturn."

Over the past two years, Paulson & Co has bought up enough land in California, Arizona and Nevada to build up to 25,000 homes and is aggressively scouting for more, according to Barr.

Private equity firms are also getting in on the game.
Blackstone Group (BX) spent $2.7 billion last year to buy 17,000 single family homes, post-foreclosure, around the United States and plans to continue ramping up those efforts in 2013.
Pine River Capital Management took real estate investment trust Silver Bay Realty Trust (SBY) public in December. Silver Bay, which acquires, renovates, leases and manages single family homes, has already purchased more than 2,500 homes in areas hard hit by the housing crisis. In a recent SEC filing, Silver Bay said that it plans to purchase 3,100 more homes.

And in a sign of investors' growing appetite for a piece of the housing market, shares of publicly traded homebuilders have been soaring. PulteGroup (PHM), KB Home (KBH), and Lennar (LEN) are all trading near 52-week highs. Pulte's shares have more than doubled over the past year, while the KB Home and Lennar's shares have nearly doubled.

And for the first time since 2004, homebuilders are testing the IPO waters.

Tri Pointe Homes (TPH), which builds single family homes in California and Colorado raised

MARKET TRENDS: Impacts Of The Improving Housing Market

A lot of people are clamoring about the improving housing market. Many wonder if we have really turned the corner and how much better it will get. Also, what impact will it make?

Chief economist, Anthony Chan, for private wealth management at J.P. Morgan in New York, as reported by Business Observer, said, "Things are getting better because housing is getting better."

The rising housing prices ignite a sense of confidence in the economy and lead to greater spending. What this means is that there is great opportunity for sellers.

One group in particular is the "boomerang buyers". That's the term being used for those homeowners who lost their home to a short sale or foreclosure in the recent past and now are shopping for another home to buy.

However, the guidelines for these buyers are strict. It's likely they have to have at least 20 percent deposit and wait at least two years after the foreclosure before they can buy again. It's unlikely that high-risk loans will be available to this group.

Sellers are noting the improving housing market and anticipating an even better year. Part of that is not only due to rising home prices but also less inventory. In December, 1.82 million homes were listed for sale according to the National Association of Realtors, down 22 percent from a year ago. The supply hasn't been this low since 2005.

This may seem like all good news, at least for sellers, but if home prices rise due to a

BUYING A HOME: First-time home buyer? Here are five tips

Want to buy your first home? You probably have some cash saved for a down payment and recommendations for realty agents from savvy friends. But have you cleared your credit report, hired a tax adviser, or weighed FHA financing, compared with a conventional mortgage?

Kasara Williams, 31, has taken all three steps in a yearlong quest to buy her first home. ‘‘This whole experience has taught me that it’s important to have your financial act in order,’’ said Williams, of Arlington, Va.

Not every first-time buyer needs a tax adviser, as Williams did to withdraw part of her IRA without being penalized. But everyone should prepare early with orderly finances, information, and plenty of patience for a long, complicated process.

Mortgage lenders and home sellers have become more demanding in the documentation they require. And with the market heating up, you should think through the contingencies and prepare your balance sheet to compete with other buyers. Here’s a primer:

Credit and Savings

Request a free copy of your credit report from the three major credit bureaus atwww.annualcreditreport.com. To avoid scams, use only this link. If you see accounts you don’t recognize or negative marks on your credit report, clear them up now.

‘‘You’d be surprised. Your parents might be on there, your cousins,’’ said Mary Malgoire, founder of Family Firm, a financial advisory firm. ‘‘It’s really important to clean it up before you start this whole process.’’

Williams learned that her father was still a joint holder on her checking account, so she asked him to write a letter certifying that all the funds were hers. She also noticed a negative item about an old dispute with Verizon over a land line that had never functioned.

‘‘I had to call them multiple times until I could talk to someone who was sympathetic and would get it removed,’’ she said.

If you see old credit cards that you no longer use, consider closing some, starting with the newest, low-limit cards that are unused. Lenders prefer a low ratio of debt to credit limit, so it’s good to have more credit available than you use. They also like to see longstanding relationships, so don’t close your oldest account. And if you close too many credit cards in a short period, that raises a red flag, as well.

Step 2: Stick to a budget

Create or revise your monthly budget so you’re setting aside the money you would pay as a homeowner that you don’t pay as a renter. This includes the mortgage, mortgage insurance, property taxes, condo or homeowner association fees, home furnishings, maintenance, cleaning, and any utilities or fees your landlord pays.

Living within this budget will teach you what you truly can afford and help you pay off credit card debt or add to the savings you should have amassed for a down payment.

Bank and credit card statements will probably be requested later by lenders. Start keeping financial statements and pay stubs in a file, where you’ll put new documents as they arrive so everything remains current.

This is an opportunity for a reality check, said Kate Fries, a certified financial planner at Family Firm. Will you stay in the area for at least five years, and do you have enough saved beyond the down payment for moving costs, maintenance, and repairs?

‘‘A lot of people jump into homeownership before they should. They get excited — their friends are doing it, the rates are really low, and the idea that you should own a home. That’s not always a good starting point,” Fries said. Review your plans to see whether you might move to another city for work or add to your household through marriage or childbirth, both of which have implications for your income, location, and size of your home, said Carter Ferrington, at Vogel Realty.

Step 3: Find a good agent

Not only can your real estate agent advise you on neighborhoods and listings, that person is

MARKET TRENDS:L Prices are up, but homes are in short supply

The supply of homes for sale has been shrinking for six months and shows no improvement so far in January — a bad sign for buyers.

Listings of existing homes for sale were down 14% year-over-year in the first two weeks of January, according to Realtor.com, which tracks 146 markets nationwide.

In Phoenix, where prices were up 24% in November from a year earlier, new listings through the first three weeks of January hit their lowest level in 13 years, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.

That's bad news for buyers, and it means "prices need to go up more" to bring more sellers to market, Orr says.

Nationwide, the supply of existing homes for sale fell to 4.4 months in December, based on the current monthly sales pace, says the National Association of Realtors. That's the lowest level in more than seven years. A six-month supply is generally considered balanced between buyers and sellers.

Home prices in November were 7.4% higher on average than a year earlier, according to CoreLogic. Real estate experts had expected that rising prices would spur more sellers trapped by years of falling prices.

Instead, January's listing data "is the same sad story," says Glenn Kelman, CEO of online brokerage Redfin. If sellers don't have to sell, "they're holding on, thinking they'll wait for prices to go up even more."

Redfin's data, covering 19 major markets mostly in the West, shows new listings down 29% the first two weeks of January vs. last year.

Scarce sellers aren't the only driver of shrinking supplies. There are fewer distressed properties for sale. Foreclosure sales were down 7% through the first nine months of last year from the same period in 2011, RealtyTrac says.

Meanwhile, demand is up. Existing home sales were up 9.2% last year, NAR's preliminary data show. New-home sales rose almost 20% in 2012, the government

THE ECONOMY: Tech sector spurs Mass. growth as US economy contracts

No one is calling it a return to boom times, but the state’s economy grew modestly in the ­final three months of 2012, even as the US economy unexpectedly contracted slightly, the University of Massachusetts reported Wednesday.

The contrast offered further evidence the state is rebounding from the recession at a more robust pace than the nation as a whole, largely on the strength of its technology industries.

“This appears to be a slow quarter, but the Massachusetts economy is growing still,” said Alan Clayton-Matthews, a Northeastern University economist and author of the report. “And growth is going to pick up.”

The state’s economy grew at a 1 percent annual rate in the fourth quarter, while the Commerce Department said the US economy shrunk at an annual rate of one-tenth of a percent, largely because of a pullback in government spending.

The state growth rates were reported in MassBenchmarks, an economic journal published by UMass and the Federal Reserve Bank of Boston. The decline in US economic growth was the first contraction since the first half of 2009, according to the Commerce Department.Over all of 2012, the Massachusetts economy grew 2.1 percent, compared with 1.5 percent nationally, according to UMass. The state also put people back to work at a faster rate — employment grew by 1.6 percent last year, compared with 1.4 percent nationally. Those figures could change, however, as revisions to the data are made in coming weeks by statistical agencies.

The report put a damper on the recent rally in US stocks, which retreated from five-year highs. The Dow Jones industrial average fell 44 points, or 0.32 percent, to 13,910.42, while the broader Standard & Poor’s 500 index fell 5.88 points, or 0.39 percent, to 1,501.96. The technology heavy Nasdaq lost 11.35 points, or 0.36 percent, to close at 3,142.31.

Economists said the contraction was not the harbinger of another US recession. But Federal Reserve policy makers, meeting in Washington on Wednesday, acknowledged in a statement that the economy had slowed in recent months as a result of Hurricane Sandy and other temporary factors. The Fed said it would maintain its policies to stimulate the economy and keep long- and short-term interest rates low.

Still, the decline surprised many analysts, who had forecast that the national economy grew at the end of last year, albeit weakly. Uncertainty about whether Congress would avoid a scheduled combination of tax increases and deep spending cuts — and potential recession

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MARKET TRENDS: Housing market strengthening in US, around Boston

Home values in the Boston area rose by 2.3 percent in November compared with the same month in 2011, according to data released Tuesday by the S&P/Case-Shiller Home Price Indices, which is widely considered a reliable measure of the housing market.

Nationwide, the improvement was more pronounced, with prices increasing by 5.5 percent in the 20 metropolitan areas tracked by Case-Shiller. Unlike some other housing barometers, the index is based on repeat home sales, which many industry analysts consider a more accurate way to gauge the market.

The numbers add to a growing bundle of economic news showing the country’s long-suffering housing industry is on the rebound.

David M. Blitzer, chairman of the index committee at the S&P Dow Jones Indices, said the increase in sales and values provides further evidence the housing market is helping to jump-start the US economy.

But Blizter cautioned US home values are not likely to continue to rise at such a brisk pace. Normally, he said, values rise a bit faster than the rate of inflation.

“We are on the rebound and at some point the rise in prices will flatten out a little bit,” he

HOME IMPROVEMENT: Home Improvement Growth Latches Onto Housing Recovery

Remodeling is rebounding and it's about time.

Just as the sales-driven housing recovery is bringing home the equity bacon for many underwater homeowners, home improvements can further boost home values and help sustain both the housing recovery and economic growth.

Spending on home improvements increased 9 percent in 2012, the first increase since 2007, according to the Joint Center for Housing (JCH) Studies at Harvard University.

When housing crashed in the late 2000s, so did the home improvement sector, leaving in its wake some 2.4 million so-called "inadequate homes."

These properties were likely converted to rentals or nonresidential use, became vacant or were permanently erased from the housing inventory, JCH says.

"With the US economy and housing market now recovering, investment in the nation's housing inventory is also picking up. Lenders and new owners are rehabilitating millions of foreclosed properties. Older homeowners are retrofitting their homes to accommodate their future needs... And with the huge echo-boom population moving into the home buying market over the coming decade, the remodeling industry can look to an even more promising future," the JCH report found.

The National Association of the Remodeling Industry (NARI) says property owners are feeling more secure about their economic future, according to its fourth quarter 2012 Remodeling Business Pulse Data.

Many property owners are using home improvements to increase their home's value, improve salability and enhance their investment in their home, but others are catching up on deferred maintenance, repairs and upgrades.

"Remodelers are indicating major growth in the future, with many saying that clients are feeling more stable in their financial future and their employment situations; therefore, they are spending more freely on remodeling needs,” says Tom O'Grady, chairman of NARI's Strategic Planning & Research Committee.

Among industry growth indicators NARI's membership found from the third quarter 2012 to the fourth quarter 2012, current business conditions were up 2.1 percent; customer inquiries up 3.9 percent; requests for bids up 3.7 percent; conversion of bids to jobs, up 3.5 percent and value of jobs completed up 4.3 percent.

In many cases, homeowners are remodeling instead of moving. That's especially true among homeowners with mortgages that are larger than the value of their home, even with a recovery underway.

These homeowners couldn't sell for a profit and rather than taking a loss, are hunkering

BUYING A HOME: Homebuying Advice: What to Know About Today's Sellers

When markets move in a positive direction, you'll hear it from real estate agents first. They see busier open houses, quicker sales or even multiple offers. By the time the news finally hits the mainstream media, buyersstart to feel the pull to get back in the market.

That's what we're seeing in many parts of the country right now. With all signs tilting toward a sellers' market for the first time in years, it's helpful for buyers to understand today's seller. No two sellers are alike, of course. But there's a certain mindset that many sellers these days share, and it's a grateful one for many. Understanding that mindset can help buyers more successfully and easily navigate through the process of purchasing a home. The same holds true for sellers. They should be mindful of the buyers that stand before them. Here are three things home buyers should know about today's sellers. (And you can find homes for sale here.)

Many Homeowners Are in a Negative Equity Position

According to Zillow's negative equity report, 28 percent of homeowners with a mortgage today areunderwater. Many sellers have been hoping and wishing for prices to increase just a little bit. Some have outgrown their current home, are forced into an hour-long commute (or longer) each day or simply want to move to a new town or area. But due to negative equity, they've been stuck. The emergence of a sellers' market provides them with a glimmer of hope. They just may be grateful for any offer that will allow them to get out at last.

Sellers are Often Buyers, Too

Often, sellers feel the same amount of stress or excitement that buyers feel because they're somewhere in the buying process, too. Though some sellers will become renters after their sale is complete, many will get back in the homeowner game soon after the sale goes through, sometimes immediately. Sellers, as would-be buyers, want to capitalize on low interest rates andhome values. Getting the home sold quickly and at today's value may be all a seller needs to make a purchase. Though it may be a "sellers' market," these sellers usually aren't greedy. They feel the buyer's pain and likely want to get out cleanly and quickly so that they, too, can buy.

Sellers Are Starting to Feel Relieved But Are Still Cautious

Even the sellers who are above water or own their homes outright are well aware of what's happened in the real estate market over the past five years. They've watched their friends and neighbors lose their shirts on real estate, forced to do short sales, or even have their homesforeclosed. They welcome the news that the market is changing, and in their favor, at