According to Realtor.com’s chief economist, Jonathan Smoke, recent housing and economic reports predict solid spring home sales.
Here are the signs that predict an upswing :
Jobs : Job creation – arguably the most important factor in housing demand – is moving apace. In January, the U.S. created 151,000 jobs; in February, it created 242,000. Unemployment is near 10-year lows. Smoke predicts that the latest employment growth should translate into a 3 percent boost to home sales this year.
Home sales : Existing home sales from January 2015 to January 2016 grew 11 percent. Sales are taking longer to close due to new truth-in-lending mortgage rules that took effect last fall, but the pace of sales is growing. New-homes sales have also grown solidly year over year, and the median price of new homes is declining as more builders offer affordable homes rather than catering only to the luxury market.
Home prices : Prices are moving up and most of that has been attributed to the limited number of homes for sale. At the current pace, there’s a four month supply of homes on the market – much lower than the norms of six to seven months. Smoke says, “This is driving prices higher and encouraging consumers who hope to buy this year to get started as soon as possible.”
Mortgage rates : Low mortgage rates are improving homebuyer affordability for now anyway. The 30-year fixed-rate mortgage averaged under 3.7 percent in the latest week, which offers buyers nearly 5 percent more buying power than they had at the end of 2015.
But not everything is perfect. The biggest negative trend impacting potential demand relates to the January and February declines in stock values, which have taken a toll on consumer confidence. Also, a tight inventory of for-sale homes could also limit sales in the spring season. But for buyers who qualify, the low mortgage rates may prove a stronger motivator than too few homes to consider.
