It’s a season of changes – signs of spring are all around! As we close the books on March 2016, here’s a look at the key trends setting the stage for a crazy spring buying season.
First things first : The economy remains strong. After a turbulent start to the year, the financial markets shook it off and ended the quarter up. Meanwhile, 215,000 jobs were created in March, capping off a strong first quarter for employment and labor force participation growth.
After taking a dip in February, consumer confidence mostly recovered in March and remains near multiyear high. The number of consumers who say they plan to purchase a home is at its highest point in eight years, reflecting that strong confidence but also significant pent-up demand for home purchases that were delayed or unsolved in 2015. Unfortunately for those buyers, there still aren’t enough homes – whether newly constructed or preowned.
Listings have grown in February and March, but demand is growing even more quickly, so homes are selling much more quickly. The median age of inventory declined 19 percent from February to March.
It certainly helps that buyers haven’t been battling the epic snows of last winter, but this early and rapid start to the spring buying season is also a result of consumers’ real sense of pent-up urgency about sealing the deal on a home. Plus, buyers are still enjoying the advantage of low mortgage rates. The average 30-year fixed conforming rate ended March almost 40 basis points lower than the end of 2015. The lower rate translates into more than 4% additional buyer power and/or makes it easier for some buyers to qualify for a loan.
The latest signals from the Federal Reserve indicate a less aggressive stance on trying to increase interest rates in the near term, so rates may indeed stay low – 4% on the 30-year throughout the spring.
The tight supply conditions favors sellers, but we estimate that 80% of sellers also intend to buy. Under a sell and buy scenario, this is not the year to wait and list.
