The housing market has undergone yet another pronounced change in the last couple months, bringing about a whole new set of trends to follow.
It was early 2013, and it finally seemed, after a prolonged slumber, that housing was finally back. Though financing remained tight, interest rates were at historic lows, and with prices finally reaching their bottom, buyer interest skyrocketed, driving housing inventories to their own historic lows and re-introducing bidding wars into the housing lexicon.
Now, though, things are a bit different. Mortgage rates are up by full percentage point, rising home prices have impacted housing affordability and inventory remains low.
What can we expect out of housing now? Here are three things to keep in mind:
1. The brakes have been hit on home prices – Some time after 2008, falling home prices pushed housing affordability to record heights, but the summer’s double-digit home price increases, coupled with the low amount of building from homebuilders, sent home prices into the stratosphere – and now, the rising mortgage mortgage rates have acted as a “red light” on prices, in the words of analyst Ivy Zelman in The Wall Street Journal. Expect home price gains to continue moderating.
2. Inventories remain low – The number of active listings was up 20 percent year-to-date in August, but housing inventory remains low; that poses problems for homebuyers, many of whom (thanks to the preponderance of syndication sites) now enter the housing market with a very distinct idea of what kind of home they want. According to data from Johns Burns Real Estate Consulting, demand exceeds supply in most of the nation’s top housing markets.
3. Jobs, jobs, jobs are the name of the game – So going forward, what is going to be the biggest indicator for the housing market? Two words: the jobs market. Unemployment remains high, especially among the younger demographics who make up the lion’s share of first-time homebuyers. Only if the economy manages to add a hefty amount of solid, good paying jobs – in other words, the jobs necessary for a home purchase – will housing truly leave its post-boom years behind.