The housing market has been exhibiting signs of recovery. The National Association of Realtors reported that the number of home sales in 2013 was the highest that it had been since 2006—just before the housing bubble burst, but, it is uncertain as to how long that this recovering market will last. In my former article, “Investor Activity Creates An Illusion in the Progress of Housing Recovery” which can be found at http://broadviewmortgageorange.com/broadview-mortgage-reports-investor-activity-creates-illusion-progress-housing-recovery-however-california-still-projected-experience-increase-home-prices-years-co/, I discussed how factors such as the combination of the Federal Reserve’s stimulus plan to drive down interest rates and investors buying up distressed homes has been potentially creating an illusion of a recovering housing market. I say ‘potentially’ because once the Federal Reserve completely stops funneling money into their stimulus plan and investors are through buying up the majority of distressed homes, we are unsure of the rate at which the average homeowner/potential homebuyer stimulates the supply and demand of the housing market.
The Demand Institute contends that the housing market will still demonstrate recovery, but at a much slower rate than it is currently exhibiting. This is because Americans are experiencing a tough time affording homes due to their incomes not rising accordingly. See the full Demand Institute report at http://demandinstitute.org/2000cities/report. So even though your home may have recently been gaining equity, the overall outlook on the future maintains that it probably won’t last forever which should lead you to your next question, “should I sell my house now, or wait to gain more equity on it?”. Here are a few pointers to help make your decision. Understanding the trends of the Real Estate market provides good insight pertaining to which type of action you should take on your home.
- Understand Supply and Demand in Relation to Home Prices: Anyone with a basic understanding of supply and demand can most likely figure out how this works. When goods (or the supply) are scarce, the demand for those goods is higher, and thus the prices can be manipulated to be higher than they otherwise would be. Therefore, when the amount of homes up for sale is scarce, the prices that they sell for is higher. The inverse occurs when there is a surplus in the amount of homes for sale, in which case the prices become lower. In 2013, the United States housing market had a short supply of homes for sale, thus driving up home prices and increasing home values. Again, remain mindful that investors have been buying up plenty of properties thus making the supply more scarce than it would be otherwise. However, it is also important to remain mindful that the supply and demand factors depend more so on local supply and demand vs. national, so ask a Real Estate Agent to provide you with your local inventory. Your local community may be experiencing a different trend than the rest of the country.
- Watch Mortgage Rates: In the past few years mortgage rates have been at a record low – an artificial record low, that is. The Federal Reserve was spending $85 billion on a stimulus plan to lower the interest rates and encourage Americans to buy homes. But, now that the housing market is on the mend, the Federal Reserve is going to cut back on its endeavors. They have already cut back their spending by $10 billion. Therefore, mortgage rates are expected to rise and more buyers will filter out of the market. Higher rates are something huge to consider when purchasing a new home. If you have trouble understanding the difference between a 3.5% mortgage rate and a 4.5% mortgage rate, and the magnitude of impact it can have on your life for the next 15-30 years, read: http://broadviewmortgageorange.com/care-interest-rates-right-now/. It may be one measly percentage point, but it can significantly effect your monthly payment as well as the total interest that you end up paying over the full term of the loan.
- The Amount of Time is Takes for a Listing to Sell: Ask a Real Estate Agent how long it takes to flip a home in the neighborhood. If a house is on the market for too long, it can drive down the market prices as it exhibits a weak market. Also, an important matter to discuss with a Real Estate Agent is to determine how long is too long.
- Selling Prices Near You: Make sure that you understand how much houses in your neighborhood have sold for recently. Consider each homes amenities in comparison to yours when trying to ballpark how much money yours could reasonably sell for at this point in time. For example, if the house next door sold for $564,000, your house could be less or more based on how many bedrooms, bathrooms, yard size, pool, what year the house was built, etc. Any renovations that you have made to the house can certainly be taken into account. If you are really eager to figure out the amount that your home is valued at, get an appraisal to tell you the market price of your home.
Overall, it is important to make your decision because you truly want to sell. Not based on the fear that every time the rates go up and purchasing power goes down that the United States is doomed to experience another catastrophic housing crisis. That would not be the best course of action as it is an impulsive reaction. The best investments are long-term investments, which require plenty of patience. The common consensus is that the economy is recovering. Slowly, but surely.
If you have any questions about the information herein, feel free to reach out to the Author, Brittany Williams, at Brittany.firstname.lastname@example.org . If you would like a quick pre-approval click here, and for assistance with down payment or buyer assistance, click here. You are also always free to give us a call toll free at (855) 692-7623.