The quickening pace of the housing recovery has surprised homebuyers and housing pundits alike, as year-over-year home prices have increased more than 20 percent in a few markets. Now there are concerns that rising mortgage rates, which closed in on 4.5 percent in recent weeks, will quash demand.
Lawrence Yun, chief economist of the National Association of Realtors, shares his thoughts:
I don’t have any concerns about the sustainability of the real estate recovery. In terms of hitting the bottom, recovering, this is genuine. It has a foundational support to it.
Now we are getting employment growth, and people who are buying are buying with larger cash shares.
Buyers are much more creditworthy than before, and given that prices are recovering now, the default rate diminishes.
I am concerned about the rise in prices in some markets being too fast, surpassing people’s income growth by many multiples. It is not sustainable. You cannot have a situation where prices rise 10 or 15 percent, incomes rise 1 or 2 percent, year in and year out.
I’m concerned about this mismatch, and furthermore, the mismatch of many younger people being unable to buy a home. It’s very low. It’s only 28 percent of the recent buyers. That’s implying that younger people are not participating in this housing market recovery.
A home is the most expensive expenditure for most families. They should feel completely comfortable in their decision, and a rush decision does not sound comfortable.
Mortgage rates are probably going to be rising, maybe there are a couple of months where it dips downward before going up again, but the most likely direction is upward. They should use this information as part of their decision-making process, but the consumer should not feel the need to make this decision quickly, because any time that happens, there’s always buyer’s remorse and regret.
The inventory selection may be better one year from now, so one may be paying slightly higher mortgage rates, but they have a better home.
Credit availability has been excessively stringent. It’ll be at least two to three years before we get back to normal standards.
What worries me is the lack of inventory, and the potential persistence of that lack of inventory. If we have a lack of inventory continuing and we will see this price growth continue, it makes it less affordable, and homeownership opportunities diminish for more people.
The choke point is housing starts. If we can increase inventory through increased housing starts, then prices will moderate, and that provides more opportunity for more people to become homeowners.
The only genuine inventory increase is either for the homebuilders to build more or for the investors to reverse their purchases. In other words, they bought; now it’s time to sell. But there are no investors doing that.
Columbia’s changing market
Home sales and prices are up in Columbia as the market extends a recovery that started in late 2011. But there are signs the rebound could slow after a summer surge as builders take out permits for fewer homes. The latest Midlands’ stats available:
Important because it shows a rebounding market.
Important because moderately rising prices are a sign of a healthy market.
More contracts have been signed, and sales should rise throughout the summer as those sales close.
Months’ supply of inventory
A normal market has about a six months’ supply of homes for sale.
Permits for new homes had been rising rapidly but the increase has slowed in recent months, indicating the market could slow later this year.