Price Increases Are Challenging Buyers
As home prices and interest rates rise, more buyers, especially first-time purchasers, are under pressure. Home prices rose sharply in the last quarter of 2016, fueled by low inventory, particularly in the entry-level home price range. Federal policies that restrict access to credit, including suspension of a planned reduction in FHA mortgage insurance premiums and high guarantee fees by Fannie Mae and Freddie Mac, will add to affordability woes.
More Renters Change Their Status
The share of former renters who have taken the plunge into homeownership has slowly but steadily increased over the last two years. The ex-renters include first-time buyers and so-called boomerang buyers who have reentered the market. Rising rents have contributed to the increasing interest in home buying.
Rising Rates, Rising Sales
Interest rates are rising, but there’s no need to panic. In the past, for each 10-basis-point increase in mortgage rates, home sales declined by around 35,000 on a national basis. Since the presidential election, mortgage interest rates have risen by 70 basis points, from an average of 3.5 percent to 4.2 percent.
Rates are rising because faster growth is expected. The Dow Jones Industrial Average has surpassed 20,000, a record high, and the economy is expected to benefit as the federal government cuts taxes, scraps unneeded regulations, and increases spending on infrastructure and defense. Higher growth means we can say goodbye to ultralow interest rates. Look for rates to rise to just below 5 percent over the next 18 months. That’s still low compared to historical patterns: an average of 8.9 percent in the 1970s, 12.7 percent in the 1980s, 8.1 percent in the 1990s, and 6.3 percent in the first decade of this century.
Bidding Wars to Heat Up This Spring
Likely to be a hallmark of this year’s spring home selling season: Bidding wars. As home listings are scarcer and buyer demand remains high, home shoppers are finding a lot more competition this spring, particularly in hot markets like the San Francisco Bay area, Denver, and Boston.
Read more: Winning in Multiple Offer Situations
“Home buyers are going to find this spring that, in a lot of markets, the inventory of homes priced and sized at price levels they were hoping for will be very limited,” Thomas Lawler, a former Fannie Mae economist who’s now a housing consultant in Leesburg, Va., told Bloomberg. Even “unlikely places are getting significantly tighter.”
An improving job market, growing consumer confidence, and the threat of rising mortgage rates have Americans flocking to housing. But many markets remain tight for listings. Housing starts remain well below levels prior to the recession and are geared more toward the higher end of the market. Homeowners also are reluctant to sell their existing home because they’re unsure of where they’d move to with the dearth of listings.
Homes are selling at a rapid clip in places like Seattle. In fact, a check of Northwest MLS records dating to 2004 shows no other month when the number of active listings dipped below the 10,000 mark – until last month. At the end of February, there were 9,091 active listings in the Northwest MLS system, which encompasses 23 counties. That represents a drop of nearly 25 percent from the year-ago total of 12,107.
The greater Seattle has seen a 25 percent decrease in the number of homes for sale over the past year. One listing alone that we represented received over 30 offers in under 24 hours and went for more than $100,000 OVER asking price.
What is our formula for real estate selling success? We have a very defined home selling process that every Home listing goes through to ensure that you have all the necessary real estate tools for successful home sale. The Cascade Team Real Estate is a company like no other, because of these tools and marketing we provide our home sellers. We understand that in today’s ever changing real estate market, home sellers expect a high level of real estate agent service. Therefore we utilize technology to keep our home selling clients up to date at all times and provide added value to both home buyers and sellers in the real estate transaction. The effective use of these tech tools allow our local area agents to focus more of their time on servicing our clients and getting their home sold, while still providing the most comprehensive real estate marketing program available. In the end, you get the perfect combination of online real estate tools and personal service when selling your home.