Summer housing market forecast
Earlier this year, the real estate industry held its breath as sellers and buyers crossed their fingers in the hope that the traditionally strong spring housing market would blossom.
Despite some concerns about the overall economy, consumer confidence is returning and the economy is gathering speed, according to Doug Duncan, chief economist with Fannie Mae, a government-controlled company that helps provide money for the domestic housing market by buying residential mortgages and packaging pools of those loans for sale to investors.
“Overall, we expect economic growth to accelerate to just over 3 percent on an annualized basis in the current quarter, and to come in at 2.4 percent for all of 2014,” Duncan said. “We anticipate a modest uptick in housing activity as the spring and summer selling and building seasons get underway (and) believe this year will likely be a bump in the long-term road back toward normal levels, which we continue to expect sometime in late 2016,” Duncan said.
Home sellers and buyers see a brighter future, too. A survey conducted on behalf of ForSaleByOwner.com found that 62 percent of respondents said now is a good time to sell a home. And 61 percent said now is a good time to buy.
Mortgage Rates Continue Falling Again
Over at Freddie Mac, a government company that also pools mortgages, vice president and chief economist Frank Nothaft reported that 30-year fixed-rate mortgages averaged 4.12 percent with an average 0.6 point for the week ending May 29, down from the previous week at 4.14 percent. A year ago at this time, the 30-year rate averaged 3.81 percent.
“Also, as the spring home buying season continues, we see stronger consumer confidence as house prices remain on the rise,” Nothaft said.
As of June 12, Freddie Mac reported 30-year fixed rate mortgages averaged 4.20 percent.
Home Prices Heating Up, Inventory Still Low
Comparing April 2014 to April 2013, home prices including distressed sales increased 10.4 percent, the 26th consecutive month of year-over-year gains, according to figures released by CoreLogic, which provides data and analysis to the financial and real estate sectors.
“Home prices are continuing to rise as we head into the summer months,” said Anand Nallathambi, CoreLogic president and CEO. “The purchase market continues to suffer from a dearth of inventory, which we expect will continue to drive prices up over the year.”
The company predicts that home prices will have increased 1.0 percent from April to May 2014. Even with the increase, home prices remained 14.3 percent below the April 2006 peak, CoreLogic reported.
According to Stan Humphries, chief economist at Zillow.com, inventory is tightest in the lower end of the market, traditionally targeted by first-time buyers. Humphries blamed high negative equity for some owners’ reluctance to sell.
Comparing first quarter 2014 to the same period a year ago, Zillow found the following significant shifts in housing supply.
Cities with an Increase in Inventory
Las Vegas, Nevada – 34 percent
Phoenix, Arizona – 32 percent
Riverside, California – 27 percent
Washington, D.C. – 25 percent
Orlando, Florida – 22 percent
Cities with a Decrease in Inventory
Houston, Texas – 27 percent
San Antonio, Texas – 24 percent
Boston, Massachusetts – 23 percent
Austin, Texas – 20 percent
Columbus, Ohio – 18 percent
Why are the decreases so much bigger in Texas? “To put it simply, demand is exceeding supply in Texas’ largest markets,” said Mark Dotzour, chief economist and director of research at Texas A&M University’s Real Estate Center. “The months of inventory of existing homes is at an unprecedented low. This means that homebuyers have little to choose from. When they finally find a house that fits their needs, there may already be multiple buyers bidding above the listing price.”
Dotzour sees a need for more new homes under construction, but that isn’t going to happen immediately. Translation: It’ll be a good summer to sell a home in the Lone Star State.
Is It Hot Where You Are?
“The general lack of inventory going into the summer selling season has created a prime opportunity for by owner sellers,” said Eddie Tyner, General Manager of ForSaleByOwner.com. “While we are seeing an increase in listings in major real estate markets such as Houston, small towns across the country are also on the rise.”
An analysis of ForSaleByOwner.com listings shows where the market is likely to be most active, based on comparing new listings in the first quarter of 2014 to that of 2013.
Top 5 Cities with an Increase in Inventory
1. Houston, Texas
2. Columbia, Kentucky
3. Las Vegas, Nevada
4. Olathe, Kansas
5. Phoenix, Arizona
Top 5 Cities with a Decrease in Inventory
1. Midland, Michigan
2. Louisville, Kentucky
3. Chesapeake, Virginia
4. Des Moines, Iowa
5. Lincoln, Nebraska
ForSaleByOwer.com analysts also looked at year-to-date activity on the website.
Top 5 Most Active Cities in 2014
1. Lafayette, Louisiana
2. Lincoln, Nebraska
3. Chicago, Illinois
4. Virginia Beach, Virginia
5. Houston, Texas