Could the headlines cause you to miss a lifetime opportunity?
Jeffrey S. Detwiler, president and chief operating officer of The Long & Foster Companies, recently shared his perspective on the Mid-Atlantic real estate market. The report below was published in Bethesda Magazine, Own magazine (a supplement to The Wall Street Journal) and multiple online outlets.
Investing in the housing market was once practically a no brainer. Through the downturn, however, many of the fixed assumptions about housing — that property values would always rise and equity would naturally grow — became variable, leaving many consumers questioning the extent to which the real estate market was a good investment option for them, or if now was the time to purchase that new home they have always wanted. It also opened the door to years of negative housing headlines in the media, some of which continue today.
The reality, however, is that the indicators we examine to determine the health of the housing market are gaining momentum. The employment picture is improving, consumer confidence is increasing, mortgage rates are low and home prices in much of the Mid-Atlantic region have stabilized. These conditions may add up to opportunity, which is why so many qualified buyers, sellers and investors are looking to evaluate their own equations in the context of the market as it exists right now.
Still, we’re finding that although the recovery is well under way in many regions, the mainstream media has been somewhat slow in reporting the full story. A home purchase for most of us is, first and foremost, a place to live, raise a family and be part of a community. But it’s also an investment that requires careful consideration as it offers an opportunity to build long-term equity. Being able to read between the headlines may present a homeownership opportunity unlike any we have seen for generations, so it’s important to recognize the headlines that support the green sprouts we’re experiencing in the economy and in the housing market.
THE ECONOMY IS GROWING
In the early months of the year, we’ve seen consumer confidence gain strength and reach levels we haven’t seen for some time. Improvement in the job market is the primary driver in boosting consumer confidence, and we’re likely to see an upward trend as companies continue to expand and add more people to the payroll.
A recent Associated Press survey of leading economists points out that experts believe the unemployment rate will fall from its current level to 8 percent by this fall, and will likely dip even more by the end of 2013.
Since last summer, the U.S. Labor Department reports that employers have added more than 1 million workers to their rosters. The economy is showing green sprouts in other areas as well — industrial output jumped in the early part of the year, car sales are booming and many experts agree that the housing market, in many parts of the country, has turned the corner.
HOME PRICES ARE RISING IN SOME AREAS
Most of the time, when we read headlines about sinking home values, we’re absorbing national numbers that incorporate the hardest-hit markets in the country. The reality is that home prices in many areas of the Mid-Atlantic region have seen prices stabilize — and even increase in some areas.
To get a clear picture of home prices in your market, it’s best to evaluate local-level data. At Long & Foster, we believe that better market data results in better buying and selling decisions, which is why we provide hundreds of publicly-available reports each month to take housing data down to county and neighborhood levels. A professional Realtor® can provide a detailed assessment for your home or one you are considering buying.
INVENTORY IS AT MULTI-YEAR LOWS
Throughout much of the Mid-Atlantic region, buyers who have perceptions of the housing market based on national headlines and reports are finding themselves facing an unanticipated situation — a narrow selection of inventory from which to choose. All of the major housing markets in the Mid-Atlantic are currently experiencing lower inventory levels than we’ve seen in at least two years — longer in some markets.
For people who have been putting off selling their homes for an opportunity to move up to a bigger or nicer house, the current situation may present a good reason to reevaluate their options. Currently, many sellers can offer their homes to willing buyers in the market and move up to homes while prices are still moderate, but this window of opportunity may be quickly closing as the recovery takes a firm hold.
RATES WILL NOT STAY THIS LOW FOREVER
Another window of opportunity that may be closing pertains to historically-low interest rates. Headlines in the media have announced for some time that rates remain at record lows. Some headlines infer that potential buyers or homeowners who wish to refinance have plenty of time to make a decision to take action since rates have held steady for some time. The reality, however, is that mortgage rates are expected to start a slow and steady climb upward in the not-too-distant future.
According to the Mortgage Bankers Association, 30-year fixed mortgage rates are expected to increase through the second half of this year, throughout 2013 and beyond. The opportunity to purchase or refinance at today’s low rates may not last much longer. Consider that, on a $300,000 mortgage, just a 1 percent increase in the rate increases the monthly payment by more than $200 a month. That adds up to more than $70,000 in interest expense alone over the life of a 30-year mortgage.
OWNING A HOME IS AFFORDABLE
As 2011 came to a close, the National Association of Realtors® Housing Affordability Index showed that housing affordability rose to record highs, with the index reaching the highest level in its 20-year history. What this means is that a home buyer’s purchasing power is greater now than it has been in recent history. Low mortgage rates coupled with moderated housing prices and stabilized household incomes present affordability conditions unlike any we’ve seen in generations.
THE HOUSING RECOVERY IS HAPPENING NOW
The headlines pertaining to housing in the last few years have left many consumers justifiably concerned about making a homeownership decision. But as we’re seeing today, by the time the media begins to consistently report on the green sprouts in the economy, the recovery is well underway and that could cause many to miss an opportunity. The fact that cash transactions are elevated signals higher activity by investors indicating they believe the current environment is a buying opportunity.
Buyers, sellers and investors in today’s marketplace understand the value that comes with working with the best-trained and best-equipped real estate professionals. Getting local facts and exploring your personal homeownership goals with a professional will help you identify an opportunity that you may not find by scanning national headlines.
Like many housing experts, I agree that we are likely to look back at today’s market in a few short years and recognize the historic opportunity available at this time to qualified buyers and sellers.
Start your home search now with The Creig Northrop Team of Long & Foster Real Estate!