Home sales have been rising in recent months, and a big reason for the increase is low mortgage rates.
All regions around the country have seen a rise in the number of sales, according to information released by the National Association of Realtors. The increase includes new construction homes, as well as pre-existing homes.
Home Sales Increase in All Regions
Overall, the number of existing property sales in the United States is up by around 9.2%. While the number of property sales has been going up all around the country, the Northeast showed a massive improvement over the past couple of months. The number of existing home sales in this region is up by 11.3% from what it was in 2014. The median price for the homes in the region is up by 4.8%. In the Midwest, the number of home sales is up by 4.1%, and the median price is up by 9.4% from 2014. In the West, the existing home sales increased by 4.3%, and the prices are up by 10.2% from a year ago. In the South, the number of sales also increased by 4.3%, and the median price is 8.2% higher than it was in 2014.
This is good news for the real estate economy, as it shows that strength is returning to the field, and is actually increasing rather than just holding steady. It’s a good time to buy, and with the increased prices, it’s also a good time to sell an existing home.
In addition to the increase in sales for existing homes, information released from the Census Bureau in May showed that new home sales increased by around 17% from April, nearing the half-million mark. This is actually one of the strongest increases in the area of real estate seen in years. In fact, the number of new home sales is higher than it had been since February of 2007.
Why Are Home Sales Increasing?
What happened to cause these changes? Why are more people buying homes today?
First, the overall economy today is stronger than it has been in a number of years. People are working again, and they are able to afford buying a property. A stronger economy is always good news for the real estate market. However, this is just one of the elements that are playing a part.
In addition to people being in a better place financially, there is an influx of brand new, first-time homebuyers on the hunt for property. The market share of properties bought by new buyers last year was 27%. This year, the number rose to 32%, which is the highest it has been since 2012. This is a good sign for real estate, and it shows how the economy has been strengthening, particularly for young adult buyers of the millennial generation.
Mortgage Rates at Historic Lows
Many lenders are starting to offer low down payment options for buyers who have the right financial background, as well. This means that those younger buyers do not necessarily have to save up a large chunk of money for their down payment just to entice a lender to provide them with a loan. FHA loans will allow for down payments as low as 3.5%, and the borrower will only need to have a FICO score of 580 or higher. These types of loans made up around 25% of all of the loans from April.
In fact, getting a loan is starting to become easier as well. Many of the major lenders are starting to loosen their requirements for getting a loan. For several years after the last crash, the banks and other lenders naturally tightened up their requirements to help keep themselves safe from buyers that could not actually afford the home.
Lenders today are approving mortgages at a rate even higher than it was in 2014. Fannie Mae and Freddie Mac offer a “Conventional 97” loan, which is available for loans up to $417,000, as long as the borrower has a FICO score of at least 620. VA loans are another option for those who are military or former military members. It is possible to get 100% financing for these loans, and the borrower does not even need to have mortgage insurance.
Consider the current mortgage rate as well. It’s currently around 4%, which is quite low compared to recent years. This means that buyers who have been waiting can now essentially get the homes “cheaper” thanks to this low rate.
What does all this mean for buyers? It means that right now might be the perfect time to buy a home.
Supply Has Trouble Keeping Up With Demand
Even though the number of new homes and condominiums being built is increasing, it is still having a hard time meeting the needs of all of the potential buyers. With the number of sales, there is currently a stock of around 4.5 months worth of homes available. This includes new homes and existing homes that are on the market.
One of the things to remember is that whenever the available stock is less than six months, it tends to be a seller’s market. This means that the sellers, whether it is an existing home or a new home, tend to have more leverage. Still, it is possible for buyers to negotiate to get a good deal on a property. In the case of buying a new construction home, they may not be able to get all of the same “extras and options” that they could have during a buyer’s market.
However, because the overall costs tend to be lower today, the deals themselves are better, and this makes more of a difference to most serious buyers. It’s far better to buy a home when the prices and the interest rates are low rather than hoping to get extra features from the seller or builder.
From a seller’s perspective, it means that they can be a bit choosier when it comes to finding the right buyer. If the buyer is unwilling to meet a reasonable price, plenty of other buyers are available to take their place.
How to Gauge the Market When Buying
Those who are thinking about buying should always make sure they take the time to stop and gauge the market before they start looking for a home. They need to make sure it is the right time for them to buy. Buyers need to consider several different factors when they are considering buying.
Consider the inventory on the market. As mentioned earlier, the current inventory, or supply of homes, is at a 4.5-month supply. Waiting until the supply is higher than the demand could be a good option for some buyers, as this is when it will become a buyer’s market. However, the property that the buyer wants might not be on the market at that time. With the speed at which homes are selling today, chances are slim that it would still be available. If it is possible to get a good deal now, it is generally worth it.
Look at regional home prices. What are the prices for homes in the area where you want to buy? Look at a number of different properties that are comparable to the types of things that you want from a property, such as space, features and amenities, and location.
Find out how long the property has been on the market. This can be a good way to find homes that are not selling. The longer a property has been on the market, the better the chance of the owner coming down in price. Keep in mind that homes today are typically selling briskly. If a home has been on the market for a long time, there could be something wrong with the property, or the seller may be asking an unreasonable price.
In addition, you will want to look at the number of all-cash sales, as well as the number of distressed sales, in the area. Each of these could have a pronounced effect on the sale of homes in the area, as well as the property value. For example, an area that has a number of run-down and distressed homes may have cheap properties available. However, unless there is something to invigorate that community and improve the quality of the area, and thus the desirability, it may be a poor investment. On the other hand, popular areas where investors are making all-cash investments could actually be a great investment location. They have enough confidence in the area to make a purchase using only cash, and this can bode well for the neighborhood.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.