Local Real Estate: Where We’ve Been & Where We’re Going
Monday, November 16, 2015
Perhaps you are considering selling your home. Here's update on where the local and national real estate markets have been over the last 18 months and where we expect them to go in 2016 and beyond.
First of all, it’s important to understand that property values are more fluid than most people realize. The housing market does not swing wildly up and down as securities markets. However, homes can rise and fall 5% to 10% in a matter of just a couple of months, depending on what season it is, what houses are selling (or not selling), what’s trending locally and/or what the Fed is doing with rates.
For example, here’s a snapshot of average mortgage rates over the last four years:
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST2012—3.66%
2013—3.98%
2014—4.17%
2015—3.83%
As you probably know, 2014 showed the rebuilding of the market. Prices did not just stabilize, but they also began to strongly increase. Fears of equity loss assuaged, many new buyers began entering the market. But inventory was low, primarily due to the fact that 10% to 15% of homeowners nationally were still “underwater” in their mortgages and unwilling to list their homes at a loss.
Rising interest rates brought many more buyers into the market; not only was money getting more more expensive to borrow, but buying power was diminishing greatly with every tenth of an uptick. Losing $50k to $100k in buying power due to increased mortgage rates can mean the difference in affording the neighborhood a buyer most desires versus their second choice.
Spring 2015 culminated in a perfect storm. While inventory picked up mildly, buyers descended in greater numbers and a frenzy ensued. Their goal: secure a property before both rising prices and rates negatively effected the search. On the other side, sellers were taking advantage of the gains, pushing their list prices and getting their numbers, often through multiple bids in the first few days of market time.
While we expected the Fall 2015 this year to be just as robust…it fizzled. We believe that this occurred because of two reasons. First, inventory remained low. Even though sellers nationally were no longer “underwater,” there were limited properties to purchase. So, as logic would serve: sellers did not list their homes because there was nothing to buy on the other end. The buyer frenzy also diminished, because mortgage rates did not continue to rise as predicted. In fact, they are averaging now at pre-2013 levels.
We believe that this is the quiet before another coming storm. Truth, spring always brings the highest level of inventory of the year. And this spring, listings will beget more listings. And given that many buyers waited on the sidelines for the Fall, not to mention the greater threat that mortgage rates will once again move up over 4%--we’re expecting spring to again bring extremely lively activity.
So, whether you are positioning yourself to pull the greatest gains out of your home or waiting for the next right move to present itself, bets are that the spring will be your opportunity. As for the future—jury is out. Thoughts are that once inventory and rates increase, the market will settle. Not a downswing by any stretch. Perhaps just a plateau effect for the rest of 2016 and moderate gains for the duration of this upcycle.
If you’re thinking about listing your home this Spring, it’s not too early to rekindle the conversation.
This column was written by Nelson Taylor of Taylor & Company at William Raveis. The firm is focused on residential real estate and investment real setate. The firm can be reached at http://www.pvdhomes.com
Related Slideshow: Tiny Houses Newport
Take a tour of some of Newport, Rhode Island's most historic homes and amazingly small homes. Many of the homes featured are in the historic and waterfront area known as the "Point Section."
"This historic 'Point' section was home to boat builders, craftsmen, sea captains, merchants, and fishermen. They lived and worked closely with the sea and were in daily contact with the large bustling wharves lining this part of the Newport waterfront over 200 years ago," says the Friends of the Waterfront in Newport.
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