As we approach this Memorial Day weekend and the un-official start to the summer, let’s take a quick look at how the housing market is shaping up so far, this year. Overall, the trends for housing sales, both new and existing, have been quite optimistic but not without some potential headwinds, like low inventory, increasing prices, and rising mortgage rates. Home affordability – or the relationship between wage growth, mortgage rates, and housing prices – continues to favor home ownership as wages and the number of new jobs are increasing faster than housing prices and mortgage rates. The homeownership rate is slated to hover between 61 to 65 percent, according to an article on Housing Wire.
Existing home sales remain a bright spot in the economy. According to the National Association of Realtors (NAR), the sales of existing homes are on pace to record the best year since 2006! In fact, the first quarter of this year posted the best pace for sales in a decade. NAR economist Lawrence Yun is quoted in an article on Housing Wire saying that he expects to finish the 2017 with a 3.5 percent increase in sales over last year. He’s projecting 5.62 million existing homes to sell by the time we close out 2017.
New home sales are also expected to show a healthy number of sales, predicted by NAR to rise 8.4 percent from last year, logging 620,000 new home sold.
The thriving housing market is not without some potential speed bumps, however. According to multiple home price surveys, home prices are rising and will likely end the year up by 5 percent or so. Mortgage rates are also trending upward as they have been over the last year. As the economy improves, rates will most likely increase as well. Fortunately, the upward trend has been slight and relatively steady so far. Yun predicts the average rate for a 30-year fixed rate mortgage will end the year near 4.3 percent, not much higher than the 4.05 percent level it’s near today. He believes next year we could see 5 percent for the average rate on a 30-year mortgage.
Housing inventory has also been an issue holding back the pace of sales. New housing projects are projected to grow by 8.4 percent this year, which will definitely help supply issues. And as prices continue to increase, demand should stabilize.
So, all that to say that this is a fantastic year to be in the market for a home. Home appreciation levels are quite healthy, currently outpacing mortgage rates in many markets making homeownership a great financial move. We expect the economy to continue growing, so if you are considering making a move, feel free to give me a shout and I’d love to discuss your specific situation and how I can help you find your place.