By, Dan Green
Dan Green(NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan at or click to get a free, no-obligation rate quote.
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Home supplies are dropping on first-time buyers and real estate investor demand. As 2013 approaches, the U.S. housing market carries momentum.
Home buyer demand continues to rise as the national supply of homes sinks. As a result, home prices are rising in many U.S. markets, creating urgency among today's buyers to "get something done" before prices rise even more.
Multiple-offer situations are becoming more common. Competition for homes for sale is expected to drive home prices up through 2013 and into 2014, at least.
Low mortgage rates, thankfully, are keeping homes affordable.
Home Prices : Higher On Shrinking Inventory
It's no secret that home prices are rising. The Case-Shiller Index, the FHFA Home Price Index and more than a half-dozen other home valuation trackers have all reached the same conclusion -- 2012 was the year of the housing market's recovery.
Buoyed by the lowest mortgage rates of a lifetime and relatively cheap housing, the number of home buyers nationwide outnumbered the number of home sellers, driving home supplies into Bull Market territory.
Analysts measure housing supply in terms of months. At the current pace of sales, they ask, in how many months would the national stock of homes for sale be 100% sold?
A 6.0-month supply is thought to represent a market in balance. Anything less than 6.0 months suggests a "seller's market"; one in which home sellers maintain negotiation leverage over buyers and are less likely to offer concessions including price concessions.
The supply of existing homes is currently 5.4 months, down 10 weeks from one year ago. The median home sale price is up 11% in the same period of time. This is the economic principle of Supply and Demand in action.
The same effect is present with new home construction.
New home supply is now 4.8 months nationwide, down 6 weeks from one year ago. The median new home sale price is up 6% over the same period of time. It's no wonder that the nation's home builders report their highest market confidence in more than 6 years.
Demand for homes is high and home supply is shrinking. It's pushing home prices higher.
First-Time Buyers, Real Estate Investors Snap Up Homes
The ongoing housing market recovery is interesting in that all classes of home buyers are participating -- first-time buyers, move-up buyers, and real estate investors.
For first-time buyers, low mortgage rates have changed the math on "Should I rent or should I buy?" At today's low rates, it can be more cost-effective to pay a mortgage each month than to pay rent for a comparable property. Plus, the availability of low- and no down payment mortgages via the FHA, VA and USDA eliminate the need to make a 20% down payment.
46% of first-time home buyers used FHA financing in 2012.
Move-up buyers -- which account for roughly half of all home buyers -- are also driving demand. Since the housing market downturn, many were left without means to purchase a new home, either because mortgage financing was unavailable, or because there was no buyer for their current home.
When first-time buyers and other move-up buyers buy existing homes, though, it frees up the former homeowners to "move" somewhere else; and the cycle continues. Move-up buyers are among the major reasons why jumbo homes are selling so briskly as compared to recent years -- it's the trickle-up effect of housing.
However, it's the effect of real estate investors that's driven home prices higher. Buying homes in bulk and locking up rental properties for the long-haul, seasoned real estate investors account for nearly 1 in 4 homes sold nationwide as 2013 begins.
Some real estate investors are use the 5-10 Properties Program to finance homes; others pay cash. In both cases, though, investors stoke demand for homes at all price points, which further weights the market toward sellers, leading prices higher.
But what makes investors different from first-time buyers or move-ups is that "buying homes" is not about relocating for a job; or outgrowing a home after having a baby. For investors, buying homes is about math and money.
Today, the math of real estate investing is hot. By 2015, however, it may not be. Once demand from real estate investors starts to slip, it may slow the growth of U.S. home prices.
Several years ago, U.S. homes languished on the market for months -- sometimes years. In 2012, though, with more than 4.6 million people back to work since 2010, historically-low mortgage rates, and the continued availability of low- and no down payment mortgages, homes sold quickly.
Competition for homes should remain equally fierce in 2013. If you're planning to buy a home, expect to pay more for it. An improving economy has lifted home prices higher.
Mark Slade
Keller Williams
917.797.5059
Good Homes
Selling a Maplewood/South Orange/Millburn/Short Hills area home involves many steps and having an experienced Maplewood New Jersey Real Estate Agent and Realtor®, specializing in the Bedroom Communities of New York City in Essex/Union County— Millburn, Short Hills, Montclair, West Orange, South Orange, Livingston, Maplewood, Springfield, Summit, Madison, Chatham, Scotch Plains, Fanwood, Cranford and Westfield--by your side will make the transaction run a lot smoother. I would love to be your Maplewood/South Orange New Jersey Area Real Estate Professional! I assist both buyers and sellers in the Bedroom Communities of New York City, mostly served by NJ Transit’s Mid-Town Direct Train Lines, offering commutes of 45minute or less to NY Penn Station, with either the purchase and or sale of residential real estate.
As an Accredited Buyer’s Agent (ABR), I have received special training to guide and educate you through the entire home buying process. From start to finish, I listen to your needs and desires in what you would like and take the information you give me to find you home. My GO-TO team can provide you the best in Real Estate advice with regard to attorney choices, Home Inspectors and Mortgage Loan Officers
As your Maplewood/South Orange/Millburn/Short Hills/Essex/Union County New Jersey listing agent I am well versed on as your local expert in all things in the Maplewood and South Orange area Real Estate Market. You can expect personalized service that includes a detailed consultation on how to best position your Mid-Town Direct home to be competitive in today’s market with training to provide my clients with an in-depth Advanced Comparative Market analysis, and advice on staging. As my office’s technology officer as well as both a Zillow Platinum Premier and Trulia Premier agent, I use the latest and most up-to-date marketing methods to get your home in front of as many buyers as possible. Being your New Jersey Real Estate Agent and Realtor ® not only involves just finding the home or selling the home, but being your guide, negotiator, advisor and advocate and making sure that your needs and goals are met. Being your New Jersey Essex/Union County area Realtor® (with a little bit of Morris County thrown in for good measure) is one of my truest passions, and “Helping You Find Your Dream Home” is my number one priority.
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