Your Mortgage View | February 5, 2018

ballesterosgroup Mortgage Watch Leave a Comment

With a Low Housing Supply & Fierce Demand, The Housing Market is Accelerating Fast

In the blink of an eye, Starbucks holiday cups are gone, all of the ornaments are tucked away, and most of those good intentioned New Year’s resolutions have fallen victim to the hustle and bustle of everyday life. Emerging from the fog of all of the holiday distractions are buyers eager and ready to purchase their next home.

In just two weeks, demand has increased 22% while supply has only increased 2%. To understand why the market is changing so rapidly, let’s dust off that old Econ 101 book that details supply and demand. When there is a lot of supply and very little demand, prices fall, which favors buyers. When there is very little supply and tremendous demand, prices rise, which favors sellers. Since 2012, the supply of homes on the market has been severely constrained and demand, propped up by historically low interest rates, has been through the roof.

When the supply of homes is low and demand to buy a piece of the “American Dream” is high, the expected market time falls. That is precisely what is occurring right now. During the Holiday Market, the supply of homes was low and so was demand. Buyers were distracted by the holidays and diverted their attention away from housing. Now that the holidays are in the rearview mirror, the supply of homes has remained at chronically low levels, while demand is rapidly rising. As a result, the expected market time, the amount of time it would take from placing a home on the market to opening escrow, is falling like a rock.

In just two weeks, the expected market time for all price ranges combined dropped from 77 days to 64, knocking on the door of an extremely hot seller’s market. For homes priced below $1 million, the market is already hot and will only grow hotter. The higher price ranges will also heat up, but will not sizzle like the lower ranges. Above $1.5 million, the market will improve, but will be a lot more sluggish.

The housing market is forging its way to the absolute best time to sell, from about mid-February though mid-May. That is when the expected market time drops to its lowest levels of the year. Homes will fly off the market at the fastest annual rate. From mid-May through June, a deluge of sellers enter the fray, exceeding the number of pending sales, and the expected market time actually rises. Going back to “supply and demand,” demand remains steady and strong while the supply of homes on the market increases. As a result, the expected market time rises. It is still a great time to sell, just not as hot as earlier in the year. From July through the remainder of 2018, the expected market time will remain elevated.

It is extremely important to note that placing a home on the market during the hottest time of the year does not guarantee success. It is still all about price. When sellers price their homes too aggressively, they sit on the market and do not entertain offers to purchase. A stunning 25% of all homes that have been placed into escrow so far this year had to reduce their asking price at least once. When the market is hot, carefully pricing a home close to its Fair Market Value is the absolute best way to approach the market. This can be accomplished by diligently analyzing recent comparable pending and closed sales and not giving too much weight to active listings. A realistic price will attract multiple offers to purchase and, often times, will allow a seller to fetch a sales price at or higher than the active listing price.

The market is not titling in favor of buyers and will not anytime soon. Buyers should approach the market with a ton of patience and the mindset that they will eventually persevere. It may take writing offers on 10 different homes, but in the end will be worth it. Interest rates are still at historically low rates, but this gift will not last forever. Waiting is not the answer.

mortgage-rates-020518

Rates Currently Trending: Neutral

Mortgage rates are trending sideways higher this so far today. Last week the MBS market worsened by -102 bps. This moved mortgage rates higher last week. Mortgage rate volatility was high last week.

Mortgage Calculator:

About the Author

ballesterosgroup