US Real Estate Market Ripening

A new report from Fannie Mae shows that everyone in the real estate market is primed for action, from buyers and sellers to the banks that make the …

A new report from Fannie Mae shows that everyone in the real estate market is primed for action, from buyers and sellers to the banks that make the deals possible. Fannie Mae’s latest survey indicates banks are easing up on lending restrictions, while buyers and sellers are becoming more engaged as prices and values increase and the market strengthens. A majority of survey takers believe home prices will continue to rise, although not as fast as the current pace, but even so the sentiment is expected to help keep the recovery on track. For more on this continue reading the following article from TheStreet

What’s the key to a healthy housing market? Simple: a big supply of willing buyers matched by a big supply of willing sellers. Plus generous, easy-going lenders.

Lenders, though still kind of stingy, are loosening the purse strings a bit, and those buyers and sellers are getting more enthusiastic by the month, according to a survey by Fannie Mae.

"The share of respondents who say now is a good time to sell a home reached a record high of 40%, compared to 30% in April and 16% one year ago," Fannie Mae reports. "At the same time, the share of those who say it is a good time to buy a home moved up 5 percentage points from April to a survey high of 76%."

While attitudes are improving among buyers and sellers, the higher number for buyers is probably due to today’s still-low home prices. Buyers are excited about bargains; sellers are merely relieved home prices are no longer falling.

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The survey also found that 55% of respondents believe prices will rise over the next few months, a high for the 3-year-old poll. Only 7% expected prices to fall over that period, a survey low.

But respondents did not expect big price gains, believing average prices will rise a modest 3.4%. That’s the lowest estimate since last September, and it’s around the long-term average for annual gains in home values.

In some parts of the country, prices have jumped at double-digit levels over the past year. A key reason was the low number of homes for sale. Many homeowners could not sell because, after the price plunge of recent years, they could not get enough to pay off their mortgage. Others didn’t want to sell because they felt prices were too low, or because they worried they could not get a mortgage for a new home. The sluggish job market meant fewer homeowners had to move.

Now home inventories are growing, in fits and starts, according to a survey by Zillow (Z), the housing and mortgage data firm. While inventories are down in some markets over the past year — perhaps because homes are selling more quickly — they have generally grown since January.

"Inventory will likely remain below year-ago levels for a while yet, as builders ramp up capacity and sellers wait to squeeze every drop of equity from their home before listing," said Zillow’s chief economist, Stan Humphries.

"But a corner has been turned. Going forward, as this new supply makes its way to market, we expect the pace of home value appreciation to slow down from unsustainably high annual levels of 5% or above to more moderate levels closer to historic norms of 3% or 4%. "

In many respects, the housing market is returning to a healthy state. Rising inventories mean buyers will have plenty of homes to choose from, and a modest pace of price gains mean buyers need not feel rushed.

Sellers, of course, would like to see prices rise faster. But sellers don’t always come out ahead when prices jump, because they must pay more for the next home. So for sellers, the good news is that prices are no longer falling and that sales are likely to happen faster due to the growing number of buyers.

This article was republished with permission from TheStreet.


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