Buying a Home This Spring, the Good, the Bad and the Affordable
by Jeanne Roberts
News sources from the Wall Street Journal to one of Canada’s top blogs, are trumpeting the meme that buying a house this spring may be challenging.
The focus of the Journal news story is on Minneapolis, Minnesota, and the news is challenging for buyers. But is it one voice speaking on many channels, or a consensus of opinion?
No one is quite sure yet. Sales have just begun to bloom, after a lackluster winter, and the overall impression is of limited inventory (i.e., 25 percent fewer homes for a 20-year low in Minneapolis/St. Paul) and higher prices. This inventory problem is mirrored in Seattle, Washington; Denver, Colorado; Tampa, Florida; and Louisville, Kentucky, among others. In Albany, New York, for example, inventory has been decimated by January storms, resulting in 33-percent fewer single-family homes on the market.
On the flip side, low mortgage interest rates – 7.5 percent in 2001 compared to today’s 3.96 percent – and you begin to see a market where buyers are likely to snatch up even that cramped, homely 1960’s rambler, as long as it has a patch of grass.
“This,” notes our crystal-ball gazer. “Is not what a recession looks like.”
And the rise in prices – at least in Minneapolis/St. Paul (aka the Twin Cities) – is not what a down real estate market looks like. Prices have risen only 7.6 percent, and interest rates make even that nudge affordable to many Gen Xers, who are buying more homes than they did even as recently as last year.
Slackers indeed. In fact, this generation, 37 to 51, is literally taking the slack out of the home market by buying up the homes that Baby Boomers are now selling to move to Florida, Tucson, and Ft. Worth. If you want to evaluate home sales by generation, the National Association of Realtors has a study, “Home Buyer and Seller Generations Trends Report 2017”.
Minneapolis, according to one analyst, is a predictor for national home values. Texas and other Gulf states, on the other hand, are the least predictive. In Minneapolis, the number of days a home stays on the market has declined to 81 days – a 10-year low.
Nela Richardson, chief economist at real estate web guru Redfin, notes the same tendency, writing that 2017 is shaping up to be the “fastest real estate market” since 2006. Richardson also suggests that home prices will continue to climb, albeit slowly.
Fortunately for buyers, there is a ceiling on how much home prices can rise. David Blitzer, chief indexer at S&P Dow Jones noted – on reviewing the December Case-Shiller home price index – that home prices cannot grow “faster than incomes and inflation indefinitely”.
Current home price year-over-year gains are traditionally in the 5.5-percent range. Real estate database Zillow, countering expectations, suggests that the rise will be a mere 3.2 percent from November of 2016 through November of this year.
Long story short: if you have the down payment, a good credit score, and a job buy your home or land now. It may be your last opportunity for the foreseeable future.