The housing market has seen plenty of challenges the last few years, but could brighter days be ahead?
Based on recent national housing reports, some markets are reporting a rosier picture now than for the first half of the year – and growing optimism heading into next year for a lasting turnaround.
Here are five market points that many in the real estate industry are thankful for this holiday season:
1. Mortgage rates are still low. Homebuyers can take advantage of borrowing costs that remain near historical lows. Last week, the 30-year fixed-rate mortgage averaged 3.99 percent nationwide, marking the sixth consecutive week of averages near 4 percent. In October, the 30-year fixed-rate mortgage reached its lowest average of the year at 3.97 percent.
“If you are planning to buy a home in the next year, it’s better to do it sooner rather than later,” said Frank Nothaft, Freddie Mac’s chief economist, said in a recent video commentary.
Still, many economists aren’t expecting the rate surge in the new year to be quite as drastic as previously seen.
2. Home sales have been inching up. In many markets, more sales are being reported. Existing-home sales in October were above year-over-year levels for the first time in 12 months, according to the National Association of Realtors’ latest report. Sales are at their highest annual pace since September 2013.
The job market may be a big contributor behind that increase, according to Lawrence Yun, NAR’s chief economist. “This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases,” Yun said.
3. Buyers are getting more choices. Homebuyers are finally getting more selection in homes for-sale. Unsold inventory is 5.2 percent higher than a year ago, representing a 5.1 month supply at the current sales pace.
“The growth in housing supply this year will likely prevent the drastic sales slowdown and coinciding spike in home prices we saw last winter due to low inventory,” Yun said. “However, more housing starts are needed to increase supply, meet current demand and keep price growth in check.”
New-home construction is gradually picking up in the latter half of the year, bringing more inventory into many markets. Single-family housing starts rose 4.2 percent month-over-month in October to 696,000 units, reaching the highest level since November 2013, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported.
4. Foreclosures are falling. In October, distressed home sales dropped into the single digits for the third month this year. Distressed sales, which include foreclosures and short sales, fell to 9 percent in October, compared to 14 percent a year ago, NAR reports. Foreclosures and short sales typically sell at a discount – 15 percent or 10 percent below market value, respectively – and can place downward pressure on overall home prices in an area. The decrease in foreclosures is helping more home values to stabilize in communities.
5. Home prices are stabilizing. The national median existing-home price for all housing types in October was $208,300 – 5.5 percent above October 2013, according to NAR’s latest report. It marks the 32nd consecutive month of year-over-year price gains. The double-digit gains in prices from last year have mostly faded away.
“Many of the fastest-appreciating real estate markets last year have now settled into a more sustainable pattern of single-digit appreciation,” said Daren Blomquist, vice president of RealtyTrac, a real estate data provider.
Still, the gains in home prices over the past year have made homeowners feel more optimistic about selling. Forty-four percent of about 1,000 homeowners surveyed in Fannie Mae’s October 2014 National Housing Survey said now is a good time to sell, marking an all-time survey high.