A strong economy and beneficial market conditions will boost housing in the spring
The National Association of Realtors has always tried to keep a positive perspective when looking towards the future, and the latest report from Realtor Mag, which anticipated a strong spring housing market, was no exception. Here are the four main trends the report spotlighted, as evidence for the market’s strength:
1. Strong Job Growth – In what realtor.com Chief Economist Jonathan Smoke called “arguably the most important factor in housing demand,” unemployment fell below 5 percent in January. Although that is overall good news, Smoke emphasized that employment is even better for the construction sector – there was a 4.5 percent job growth in residential construction in 2015, thanks to an increased surge in new home sales. Smoke predicts a 3 percent boost in home sales thanks to the employment growth alone.
2. Rising Home Sales – Even with sales taking longer to close on account of new mortgage rules, existing-home sales still grew 11 percent from Jan. 2015 to Jan. 2016. Additionally, new home sales have grown year-over-year, and NAR’s Pending Home Sales Index has increased year-over-year for 16 consecutive months.
3. Steady Price Gains – Prices have been walking a slim line between healthy growth and the kind of increases that threaten affordability, but Smoke considers the current slow, but steady price growth sustainable. While there is some concern with the still limited inventory – only a four months supply, compared to a standard healthy market’s six – the increase in new residential construction may start to bolster inventories as more homes reach completion.
4. Competitive Rates – Low mortgage rates make the current market a prime time to buy, according to Smoke. With 30-year fixed-rate mortgages down below 3.7 percent, buyers have nearly 5 percent more buying power than they did at the end of 2015. The mortgage rate has been attributed to many things, including the falling stock market and the drop in crude oil, but with the unpredictability of global economies and the prediction that crude could rise to as high as $70 a barrel by the end of the year, mortgage rates may not stay this low forever.