The housing market is complicated, and due to the pandemic, it has changed significantly. This has led people to believe that this market is not going to improve so easily. However, if you are interested in knowing more about how the housing market is improving or not, then you need to read the article we prepared for you.
Is the Housing Market Improving? How to know? hide
In today’s entry, we are going to provide you with the most relevant information about the real estate market, and by the end of the article, you’ll know how to compare activity within the real market month over-month.
First ways to see if the house market is improving
To know if the housing market in any given year is getting better, you have to compare activity each month, but also year-over-year. You have to be aware that the real estate market works in cycles.
There are times when the market is up and sometimes it’s not doing so well. For instance, the mortgage meltdown of 2007 taught us a very important lesson, and we learned that real estate prices don’t rise continually.
Moreover, the housing market crash back in 2007 shattered many people’s dreams and threw the market into a spiral of chaos.
During 1981, interest rates rose to 18.45% and plenty of first-time buyers didn’t stand a chance. In the mid-1980s, the tax reform act of 1986 had a negative impact on the real estate market.
Not everyone can forget about the fall of the housing market that started at the end of summer back in 2005. With this information, it will be easier to know whether the housing market is headed to a better path or not.
Ways to tell that the housing market is doing better
Next up we are going to present you some of the signs that let you know that the market is improving.
A recovery in the job market
Whenever you hear your neighbor’s car pulling out of their garage first thing in the morning after months of zero activity, then you can tell that your neighbor started working again.
When the unemployment rate drops and people get back to work, it is a clear sign that the housing market is recovering.
For sale signs are gone
Too many for sale signs in the neighborhood means there are way too many homes for sale and generally speaking, not many buyers are interested in buying those houses. Excess inventory pushes down sales costs.
Median sales costs stop falling
It doesn’t matter if you track home sales by per-square-foot cost, average or median prices, when the market is not doing well, all the prices fall.
Starter homes are sold faster
When demand is on the rise, properties tend to sell quicker, and the days on the market are limited. A starter property that is priced correctly and in good condition, should typically sell within 30 to 60 days.
Closed businesses reopen
Nothing shows more faith in a difficult economy than when entrepreneurs open a new business in the neighborhood. Whenever you spot the boards being taken off of a closed up shop and a new sign is hung, it means recovery is on its way.
No more distressed sales
If you no longer have to wonder if the home for sale is a foreclosure or a short sale, then you can tell that the market is improving. When traditional sellers sense that the market is stable enough, they will put their houses on the market because those sellers will have equity.
Real estate hiring agents
In a messy real estate market, realtors tend to leave the field in droves, meaning real estate companies will lose workers. When the time to improve comes, real estate companies decide to expand and hire more agents because they can’t do the job without the assistance of realtors.
Interest rates are attractive
If financing is scarce, the cost of lending that money will increase. Because of that, when a lot of money is available to lend, interest rates are going to fall.
New buyers appear
The National Association of Realtors Housing Affordability Index has the duty of tracking the percentage of buyers who can truly afford to purchase a house.
The higher the percentage, the lower the income that is needed to qualify for a mortgage.
Sellers buy move-up properties
During hard times, the only sellers who sell a property are those who must due to circumstances beyond their control, such as a job transfer or even a divorce, or they can’t afford to pay their mortgage debt.
The move-up market becomes stationary, and in a more balanced market, it’s not only a good time to sell but also the best time to purchase a home.
What professionals are saying about the current housing market situation
As we approach the 2022 spring homebuying season, experts predict a busy period, but not as heated as back in 2021. Home values skyrocketed by nearly 15% in 2021, according to the most recent information shared by the S&P Case – Shiller national index of home costs.
While housing prices aren’t expected to drop during 2022, the increasing rate of prices should start slowing down. A lot of experts believe property values will increase at roughly half the rate in comparison to the peak of 2021.
Buyers may still have to face bidding wars, but they aren’t likely to happen too often. That means sellers could not be as selective when deciding between offers. In 2021, all cash-offers and regular loan offers with appraisal contingencies were often needed to win the race.
This year as a buyer, you might be able to be more flexible with the terms of the purchase contract, even if you are not getting a deal on the cost.
Kerry Melcher, head of the real estate at Opendoor, an online residential real estate platform, shared that the seller’s market will continue to grow into the 2022 spring homebuying season, but it should be less competitive for buyers than the previous year.
According to Melcher’s opinion, “The spring season is going to be a high demand process” she stated. However, it’s not going to be the same as in 2021, where supply was out of balance with the demand.
Spring tends to be the busiest time of the year for this market, and according to Melcher, it’s going to be just like a normal spring season. She also thinks the number of properties for sale should be higher compared to 2021 but it can also remain lower than expected.
Furthermore, Melcher expects to see an increase in home cost appreciation, as well as single-digit home price growth, which could be at a much slower pace than previous years.
Mortgage interest rates may go up, and this will definitely have an impact over your buying power as a buyer. She recommends to every buyer “Understanding your financing is key in these scenarios”, she says, meaning it’s vital to comprehend the upper limits of your home buying budget.
You may be able to be a perfect candidate for a loan amount that is more than you expected, and you don’t want to get caught in a war with other buyers just to end up with a higher monthly payment.
In case of selling, you should get ahead with any of the upgrades you want to make before listing your house, especially if you can’t do the job by yourself.
Foreclosures in 2022
The U.S started seeing an incredible increase in foreclosure activity towards the end of last year, but still, the numbers continue to be much lower in comparison to pre-pandemic levels.
In fact, foreclosures decreased a surprisingly 30% from the year before. Nevertheless, before getting too excited, you have to be aware that the reason behind this decrease was the government’s temporal ban on foreclosures.
Foreclosures weren’t a thing for most of last year due to the fact that they weren’t blocked. Foreclosures increased fast by the end of the year, around the time the ban was lifted.
For instance, last September, foreclosure filings rose up to 24% compared to the previous month, and up 102% compared to a year before.
So, while there will likely continue to be fewer foreclosures than in a stable housing market, it’s likely that more foreclosures are going to happen during 2022, as mortgage lenders work to get back to their common market situation.
Here’s a closer look at what the foreclosure stuff means for both homeowners and buyers:
- For homeowners: With the end of the ban on foreclosures, it’ll be tough for any homeowner without a stable job and income to keep up with mortgage payments. If this is your case, then you could try and find multiple job opportunities so that you can pay your debts.
- For homebuyers: If you are a homebuyer, more foreclosures mean you may find an exciting discount on a property. But keep in mind that purchasing a foreclosed home could come with other issues. So you need to make sure you do a proper research on the house before buying.
As you can see, there are plenty of reasons to believe that the housing market will improve, so you can use this information to determine how stable the market is where you live.
