April 24 — Oh what a contrast from 4-5 years ago. In the dark days of real estate reporting in 2008 and 2009 there was a steady drumbeat of foreclosures, short sales, record home inventory backlogs, and falling prices. There were no buyers, it seemed, and although there weren’t many sellers, it wasn’t from lack of trying.
Something to (Grouse) About
Fast forward to the March sales report from National Association of Realtors (NAR) that came out this week. Sales are up 10.3% above the year ago month, and the median price of a home, $184,300, increased 11.8% over February. But if you thought the NAR would be downright cheery about this situation – guess again. There’s a problem – not enough inventory. There is currently only a 4.7 months supply (6 months is considered healthy). That lack of supply is blamed for month to month sales slowdowns. While a drag on the market for existing homes, this has been good news for builders, who are finding a more welcome market for the new homes they are starting to build in increasing numbers. The higher end of the market is doing much better than the lower end, which appears at least partially to be related to a decline in the share of purchases from first time home buyers. Sales of existing homes dipped in the West and South, remained unchanged in the Northeast, and increased slightly in the Midwest. There were significant increases in the price of homes in all markets.
Various press accounts cite a paradox explaining the inventory slowdown. One reason for it is that the number of foreclosures is declining. Another is that many home owners have a price in their mind for what they want to get for their home. Prices haven’t yet risen to that level, so they are reluctant to put them on the market. Yet the homes that are for sale have more would-be buyers these days, so above asking price offers and bidding wars are starting to crop up in some markets.
Another factor in the housing market’s favor is near-record low mortgage rates. The average 30 year fixed mortgage is at 3.41%, just a whisker above the all time low of 3.31 in late 2012. Few people want to miss out on those rates. (Editor’s note: We bet we are not the only baby boomer who had a 16% mortgage back in 1982).
So is it time to buy yet?
In our opinion the sentiment in the market has changed. There is pent up demand, including from baby boomers who have been on the fence about buying their retirement home. Nobody wants to miss out on the low prices that have existed for the last few years. The braver folks who bought in the depths of the market look like they made good decisions – at least today. Many others also don’t want to sell their existing home at a price lower than their “target” – if that still has room to rise. And they often can’t buy a new home until they get the money from the old one.
We can’t tell you if this is a good time to buy; that is a highly personal decision. But we can tell you that the trajectory of the market seems to have changed. What do you think?
2019 Update: According to the National Association of Realtors, the Median Sales Price of Existing Single-Family Homes for Metropolitan Areas was $257,600 for the U.S. in the fourth quarter of 2018, which was up 4% from the 4th quarter of 2017. Early 2019 mortgage rates for a fixed 30-year mortgage was closer to 4.0 % than the 3.41% offered in 2013, when the article was written.
Comments? We are very interested in your opinions – is this is a good time to buy or sell? Did we miss the window, or is there a bright future ahead? Please share your thoughts in the Comments section below.
For further reading
Home Sales See Growing Pains (Wall St. Journal)
Those Dang Boomers: They’re to Blame for Rising Urban Home Prices