Real estate has been a buyer’s market for the last five years or more, but that may soon be changing.
The National Association of Realtors reported recently that a seller’s market is developing and home prices continue to rise steadily above year-ago levels. According to a recent report by the Wall Street Journal, there are only 1.71 million homes listed for sale in January 2013 compared to 2.91 million homes on the market two years ago.
The upshot is that there’s a growing pool of buyers chasing a shrinking supply of homes. If the trend holds, prices will keep going up. At the current pace of sales, it would take just 4.2 months to sell the current supply of homes available for sale, down from a 6.2 months’ supply one year ago.
A report from CoreLogic late last year shows nationwide housing prices increased by 6.3 percent from October 2011 to October 2012, the largest increase since June 2006. This data includes the prices of distressed homes, which makes it even more impressive.
In a recent report from Barclays Capital, housing prices are predicted to return to peak levels as early as 2015 after falling more than a third in what Stephen Kim, an analyst with Barclays, referred to as “… a dramatic over-correction during the prior five years …”
With investors buying up properties that are selling for less than their replacement cost, home sales could rise to 5.2 million units this year, an increase of nearly 12% from last year, according to economists at Goldman Sachs.
The combination of factors which include housing prices rising, low inventory, and record low interest rates have fueled an increase in buyers looking to take advantage of current conditions. Many investors and home buyers believe that now is the best time to buy a new home. The Mortgage Bankers Association forecasts that home sales will increase and expect new-home loans for purchases to jump 55%, based in dollars, in 2013.
Many home buyers now realize that the time to get the best deal on a new home is quickly coming to an end and the biggest problem could be lack of inventory and choice. If this trend continues, we will see a seller’s market developing in the near future.