The real estate market has seen steady and consecutive growth for the past five months. Though instead of growing the streak to six, June saw a lapse in the number of signed contracts for home buyers. The drop in June, 1.8 percent on the pending home sales index, brings it to 110.3 overall. Still, an improvement over the last 12 months where we saw a jump of 8.2 percent overall.
Pending sales act as a barometer for future purchases because of the lag, generally a month or two, which exists between contract and a completed sale. Does this decline indicate a peak in the steady growth we have over the last year or is this just a small hiccup in even bigger growth to come?
Buying a home is no small endeavor, whether you’re a first time buyer or a seasoned vet, it’s good to know what the market is doing as a whole before plunging in with both feet.
Existing Home Sales Are On the Rise
Existing home sales are up considerably compared to a year ago. The growth in this area is largely due to people realizing the equity they have gained over the last few years that they are now looking to capitalize on.
"Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down” says NAR chief economist Lawrence Yun.
The kicker comes when we realize that most of these sellers are going to be buying another home. Meaning there won’t be a net increase in inventory, keep the market competitive.
As Supply Falls, so to Do Sales
The number of signed contracts to buy homes saw a dip in June because of the consistent and rapid growth. Houses are being bought quicker than new ones are going on sale. The shrinking availability of homes is rippling through the market causing some buyers to reconsider their original intentions.
The Limited Options Might Change Minds
The competition and low inventory has not only reduced choices, but in a lot of cases it has pushed prices above some buyers’ comfort levels. In 2015 the national median existing-home price for all types of housing is expected to increase 6.5 percent, which would match the record high $221,900 that was set in 2006.
"Rates have been slowly creeping up since April of this year but are still historically low... If you can afford to buy responsibly, now is a great time to lock in the best rate on your dream home." offered Justin Cicero, BizX member, owner and partner of Clear Realty Group.
The demand is there, but it will come down to whether or not buyers decide to pull the trigger now or hold off until supply improves and price increases slow.
Where Have All the First Time Buyers Gone?
Less Millennials live on their own in 2015 than did in 2007, before the economic downturn. 42.7 million Millennials were living on their own in 2007 compared to 42.2 million in the first four months of 2015. As the job market fails to rebound fully, more Millennials are choosing to live with friends and family instead of setting up households of their own.
All Time Low Mortgage Rates Steadily Climbing
The average 30-year fixed mortgage rate currently sits at 4.04 percent. Though it is steadily rising, up from 3.59 percent which represents last year’s low. It is still roughly 2 percent below the historical average.
"Speculation is that the Fed will increase rates before the end of 2015 increasing mortgage rates and payments for borrowers," added Cicero, "once interest rates start to rise, there will be increasingly less buyers that can qualify for a mortgage to purchase your home."
Though it’s hard to tell if this is really a market peak or just a small slowdown, things change rather quickly and it's beneficial to know trends and happenings within the industry. Nationally things may be slowing down but the Seattle market is still quite hot. Check out more on the Washington market in another of our recent posts!
