By every measure, it seems as if the real estate market is on its way back up, but will today’s growth last, or could these signs of improvement also be signs of future struggles?
Home sales increased another .4% in January, and sales prices have increased 12.3% from January 2012. The last time prices increased that drastically was at the height of the market between July 2005 and May 2006.
The culprit behind this growth: a shift in supply, demand, and mortgage interest rates. Interest rates have dropped lower than ever, which has stirred interest among those not wanting to miss this opportunity to buy or refinance while values are still below the 2006 high and rates are the lowest in history. Buyers are eager to jump into the market in these conditions, which explains why buyer activity has increased 40% since last year.
While real estate investors have been key players in the increased buyer’s market, scooping up lower-priced homes, the seller’s market has remained reasonably steady. However, eventually these cheap homes will disappear, and investors will transition into sellers. Buyer activity will decline, while seller activity climbs, resulting in less competition among buyers and fewer bidding wars for sellers. In that climate, sellers will be more likely to be forced into accepting lower offers.
Another influence in lower sales prices will be the inevitable rise in interest rates, either due to inflation or for other reasons factored by the Federal Reserve. Buyers will be forced to pay less for the same payments, and will thus submit lower offers.
As is expected while recovering from a recession, there will be some give and take with the market. For now, it’s still an opportune time to buy or sell. Have questions? Send me an email, or give me a call – I’m happy to answer any questions.