If recent trends are any indication, it’s going to be a big summer for the mortgage and real estate industries. The U.S. housing market continues to improve in many areas. Demand is rising while inventories are shrinking. Low mortgage rates are hovering at or near record lows, enticing home buyers into the market.
Here’s a rundown of the recent trends we are following:
More Homes Being Built
Housing construction is on the rise, resulting from strong demand and a gradually improving economy. According to the U.S. Census Bureau, housing starts rose to 1,036,000 in March of 2013. That was an increase of 7% over the previous month and 46.7% over the same time last year. This is a slow but steady return to normalcy, and a positive sign for the housing market as a whole.
Mortgage Rates Near Historic Lows
Last week, Freddie Mac reported the average rate for a 30-year fixed mortgage loan was 3.35%. That’s only slightly higher than the all-time record low of 3.31%, which occurred in November 2012. Last week marked five consecutive weeks of falling rates. Also last week, the 15-year fixed mortgage fell to an all-time record low of 2.56%.
Low rates are driving demand and bolstering the housing market. Rates are expected to remain near their current low levels through summer of 2013, partly the result of actions taken by the Federal Reserve to suppress interest rates across the board.
Home Sales Returning to Normal
According to Jed Kolko, chief economist for the real estate website Trulia, existing home sales are 60% back to normal. In this context, “normal” refers to pre-bubble levels. Home sales dipped slightly in March, but that’s mostly due to a lack of inventory in many metro areas – not a lack of demand.
Home Prices Are Rising
The S&P/Case-Shiller Home Price Index is published on the last Tuesday of every month. It is one of the best indicators of pricing trends within the United States. According to the most recent report, released on April 30, average home prices rose 9.3% from February 2012 to February 2013.
“The 10- and 20-City Composites recorded their highest annual growth rates since May 2006,” said David Blitzer, Chairman of S&P’s Index Committee. “[A]ll 20 cities saw higher prices for two months in a row. The last time that happened was in early 2005.”
Coming This Summer: A Hot Housing Market
What’s the housing market outlook for summer 2013? That largely depends on where you live.
Most of the metro markets in California will be hampered by a serious inventory shortage. According to Realtor.com, real estate listings have fallen by 63% in Sacramento over the last year. Orange County inventory is down by 58%, Los Angeles by 48%, and San Diego by 41%. Buyers in these markets will have their work cut out for them.
Many housing markets on the East Coast are just now entering a recovery stage. Home prices in many eastern cities have been slow to rebound, but most are now on the rise. These housing markets could have their best summer since before the housing collapse, in terms of activity. (Washington, D.C. is an exception to this ‘rule.’ It is currently one of the hottest markets in the country.)
Prices are currently rising fastest in the cities that were hit hardest by the housing collapse. These include Detroit, Las Vegas, Phoenix and San Francisco. But the trend is being mirrored to some extent across the entire country.
Declining inventory, rising prices and growing demand are causing a major shift in housing markets cross the country. Just a few years ago, we saw buyers’ markets in almost every city in the country. It was tough to sell in those days. Now, market conditions are shifting to favor the seller over the buyer. It should be an interesting summer.