Buy That House Before It’s Gone?
The housing market is near its strongest in a decade.
According to the National Association of REALTORS® and the Census Bureau, more than 6 million homes changed hands last year, marking the first time that’s happened since 2006.
The rise in home sales can be attributed to many factors. Three big ones, though, are rising U.S. rents, which has changed the math of “Buy vs Rent”; loosening mortgage guidelines nationwide; and, stubbornly low mortgage rates.
Today’s mortgage rates are in the mid-3s. ARMs are in the 2s.
Plus, there’s an abundance of available low- and no-downpayment mortgage programs, including the brand-new, 3% down HomeReady™ loan which has widened the pool of potential home buyers nationwide.
Homes are selling quickly and they’re selling at higher prices.
Existing Home Sales: 5.47 Million Homes Sold Annually
Each month, the National Association of REALTORS® publishes its Existing Home Sales report, a tally of sold homes which have been previously-occupied, or are otherwise not considered as “new construction”.
The trade group’s January 2016 report shows 5.47 million homes sold on a seasonally-adjusted annualized basis, an 11% increase from the year prior.
The sharp increase has been attributed to low mortgage rates, rising rents, and a softer approach toward mortgage approvals for many U.S. banks.
Demand for homes has been high — so much so that supply can’t keep up. There are now just 1.82 million homes for sale nationwide.
At the current pace of sales, the entire stock of homes for sale would be “sold out” by Memorial Day; winter months aren’t known for strong home sales.
In January, Median Days on Market for an MLS-listed home was 64 days. This is the fewest number of days for January since the National Association of REALTORS® been tracking such data.
- January 2012: 99 days
- January 2013: 71 days
- January 2014: 67 days
- January 2015: 69 days
- January 2016: 64 days
It should also be noted that in each of these years, January marked the annual peak for Median Days on Market. Should that trend hold through 2016, homes will be selling markedly more quickly.
32% of homes sold in 30 days or less in January.
32% Of Homes Sold Within A Month
The January Existing Home Sales report showed homes selling quickly. Homes typically sold in 64 days last month — an 7% decrease over the year prior.
But, while Median Days On Market remains an imperfect measure of the housing market’s strength, the data sometimes highlights the relative ease with which a seller can sell a home, and the relative difficulty a buyer may face in buying one.
Three main factors affect Median Days On Market — the economy, median rent prices, and national sentiment toward housing.
When the economy is performing well, for example, consumers may be more likely to take risks, including the risk of buying a new home.
More risk-taking helps homes to sell faster, and moved Days on Market lower.
Rising rents can also cause Days on Market to drop.
When U.S. rents are rising, it puts a strain on the budget of the nation’s renters. It also affects the answer to the question “Should I buy or should I rent?”
Median rent is up more than four percent nationwide. In certain housing markets, though, such as San Francisco and Seattle, rents are rising even more quickly than that.
A number of U.S. households have had enough.
Rather than signing new leases, they’re choosing to buy new homes instead. And, because many are buying “starter homes”, they’ve found the 5-year ARM to be an excellent budgetary fit.
However, there’s a third, less obvious reason why Days on Market can change, and it’s linked to home seller sentiment.
Sometimes, regardless of the market’s strength, home sellers just feel “less confident” in the market. Now is one of those times.
Is It Really “A Good Time To Sell”?
According to a Fannie Mae consumer attitudes survey, 50% of consumers now think it’s “a good time to sell” a home, up 1 point from the month prior.
When sellers think “it’s a good time to sell”, it’s typically because they believe housing is nearing a peak, or about to fall from one — and these types of thoughts can favor buyers.
When sellers are concerned about their future ability to get top-dollar, it can result in homes being listed for cheaper prices today; and, in home being sold at “the first reasonable offer”.
Strangely, though, sellers may have it all wrong. According to the data, the housing market’s going quite strong.
The January Existing Home Sales report shows a national home supply of 4.0 months; and home supply of anything less than six months is believed to put sellers in prime negotiation position over buyers.
Today’s housing market is one of the strongest in a decade, in other words, but sellers are behaving like the market’s in a downturn. For buyers, this creates opportunity.
Sellers may be currently undervaluing their home. Demand outweighs supply, and values are expected to rise. You may pay less for a home today than you’ll pay in six months.
The market looks ripe for a deal.