Rarely does a day go by that I don’t get asked if this is a good time to buy and/or sell a home. Some people might think that my response is always an emphatic “YES!” because I work in real estate. But in truth, there is no right or wrong answer. Every person’s circumstances are unique, so in some cases the answer might be yes, but for others it might make more sense to wait.
The good news is that we’re finally coming out of the housing slump
of the past five-plus years. Housing is a major driving factor of the
U.S. economy, so regardless of whether or not one owns a home, a
stronger housing market is good for everyone. For some would-be home
sellers, this positive momentum, combined with a rise in home prices and
buyer activity, is enough to compel them to list their home. And right
now the statistics appear to be on their side.
According to the most recent findings from the National Association
of REALTORS®, total housing inventory has fallen for the past several
months, settling at just under two million existing homes on the market
that are available to buyers. This represents about a four-month-supply
of homes throughout the U.S. This is the lowest housing supply the
nation has seen since May of 2005 – during the peak of the housing boom.
“Months supply” basically means that if existing homes were to
continue selling at the current rate, the inventory of homes would be
sold by that many months. A “normal” market usually has around six
months of supply; therefore lower numbers mean a shortage of inventory.
If demand is greater than supply, this often leads to competition
amongst buyers and rising prices.
The following graph demonstrates the downward trend in the overall
U.S. month’s supply of homes which is currently at about 4.4 months:
As long as inventory levels remain low, competition amongst
buyers will remain high, and home prices should continue to rise – albeit at a healthy rate – not like what we saw during the
housing boom in some areas. As evidence of this, in the recent Home Price Expectation
Survey, 105 leading housing analysts called for a 3.1 percent increase
in home values by the end of 2013. And in a recent report by the
National Association of REALTORS®, median home prices last quarter
showed the strongest year-over-year increase in seven years.
Another thing that buyers and sellers need to keep their eye on is
interest rates and their impact on affordability. Interest rates have
been at such historical lows for so long that it’s easy to take them for
granted. But the truth is that several lending institutions, including
Freddie Mac and the Mortgage Bankers Association, project that interest
rates will rise from 3.4 to 4.4 percent by the end of 2013. A full point
increase can have a significant impact on the amount of your mortgage
over the long term.
With these types of projections, one might wonder why there isn’t a
flood of homes coming on the market. The biggest concern I hear from
many would-be sellers is that they’re going to lose money because their
home is worth less today than when they bought it. A valid concern, to
be sure, but not necessarily the case for many folks. Remember, you’re
buying and selling in the same market conditions, so if your home has
lost value in recent years, it is highly likely that the next home you
buy has as well.
Source: Ob Jacobi / Rismedia