Are you currently trying to buy a home? Good luck to you.
Presently, the housing market is the definition of a “seller’s market.” Home prices are at a remarkable high, and good properties are being scooped up about as fast as they’re being listed. It’s great for sellers, especially when they can sit back and enjoy a bidding war on their property. But for buyers, let’s just say that the current market may be a bit frustrating.
How hot is the housing market? Consider this: Home prices are up nearly 7 percent from where they were at during the market’s previous peak in July 2006. That was when new construction was booming, and obviously right before the economy bottomed out. The housing market isn’t just hotter this time, but there are no signs that the country is headed toward any kind of recession, another factor that has home sellers rejoicing. Economic growth is good, unemployment is low, and people are making more money in part thanks to the tax reform signed into law at the end of 2017. This all translates to a hot housing market that is expected to get even hotter as spring – and then summer – gets underway.
Nationwide, a report indicates that the market is up more than 6 percent just from earlier this year. The hottest markets? Seattle, San Francisco and Las Vegas, where properties spend just days on the market. We get that it can be a frustrating time for buyers, being that supply is low and prices are continuing to escalate, but for the most part these consumers have stayed determined. In other words, it’s a seller’s market, but the buyer demand for good homes is still there, even if it can be trying at times.
This all begs the questions: can anything stop it?
There are a few notable things to look out for when it comes to the current housing market, and whether it’s bound to plateau anytime soon:
Mortgage interest rates: Interest rates have gone up by about a half-percent over the past year, but the average 30-year fixed rate is still 4.47 percent. It’s the highest the fixed 30-year mortgage rate has been in about four years, but it’s still well below historical averages and helping to fuel the hot market. There’s an expectation that rates could climb to 5 percent by the end of the year, which many believe would cause the market to cool a bit. That’s likely because a 5 percent average mortgage rate would force some buyers out of the market. However, it is worth noting that the housing market has only gotten hotter over the past year, even with average mortgage rates rising by a half percentage point.
People are acting now: We already mentioned that the market is considerably hotter than it was a month ago – and one of the reasons is because buyers are feeling like they’re increasingly under pressure to find a home before it gets even hotter. Couple this with the expected uptick in interest rates, and there’s a sense of urgency among many home buyers to get it done now, or risk being out-priced in the future. If many home buyers feel this way, this will lead to an inevitable cool down in the coming months, likely after the summer season.
More inventory: Another thing that could cause the market to cool is more quality homes for sale. One of the reasons why the market is so hot and prices are continuing to increase is because there aren’t a lot of quality homes available. Hence, the ones that are quality get scooped up in no time. Rather than pick away at the scraps, buyers move on to another quality home, often pitting themselves against several other offers that the seller has to decide from. If more homes were to hit the market, the greater amount of inventory would help decrease the competition.
For now, if you’re selling a home, you can sit back and enjoy the ride. And if you’re a frustrated buyer, you can find solace in the fact that this hot market isn’t going to last forever.
Regards,
Ethan Warrick
Editor
Wealth Authority
