Frustrated potential home buyers may have some reason for optimism. A number of economic trends are beginning to coalesce into what could be the beginnings of a far better market environment for first-time and low to moderate income home buyers.
Keep in mind, however, the important caveat is that real estate is one of the riskiest economic activities to generalize, in terms of “national trends.” The reason for caution is expressed succinctly by Move, Inc. economist Jonathan Smoke, who says, “All housing is local — and hyper local at that — and behind each buying decision is a household with its own context for what’s right or best at that given time, as well as for the future,” Smoke says.
As home buyer confidence rises, there are declining commitments to buy homes, shrinking numbers of home owners, and consequently, an erosion of home price inflation (attention buyers!).
If you’re on the fence about buying a home, you should take into account the following three reasons that will convince you to move quickly on your first home, now.
1. Growing consumer confidence
A brighter economic outlook has dawned as consumer confidence soared to a near seven-year high this month. The Conference Board said consumer confidence jumped to 90.9 in July from 86.4 in June. The reading, the highest since October 2007, was largely fueled by strengthening job gains and a stock market rally. Also, gasoline and food prices have stabilized after rising sharply in the spring.
Not that the economy is booming. Holding back more robust economic growth is a housing recovery that has slowed significantly this year, in part because of higher home prices and mortgage rates, which can be viewed below.
2. Declining commitments to buy homes
Fewer Americans than forecast signed contracts to buy homes in June, a sign residential real estate is struggling.
Limited availability of credit and sluggish wage growth are making it harder for prospective buyers to take the plunge, threatening to throttle the pace of the housing recovery. Continued gains in employment and a bigger supply of available homes will be needed to help accelerate the industry’s progress, which Federal Reserve Chair Janet Yellen has said is lackluster.
With less competition from other potential home owners, shopping for the house of your choice may not be so impossible.
3. Home prices are more affordable
As a result of these pressures, there are indications that soaring home prices may finally be coming back to earth. Standard & Poor’s Case Shiller index showed that average home prices in 20 large cities were up 9.3 percent in May from a year ago which amounts to the smallest annual gain in more than a year.
Housing market analysts say the moderating housing costs are actually good for the market, helping make homes more affordable, and giving many potential first-time buyers and low to moderate income families their first shot at landing a home at a price that won’t blow their budget.
It’s a healthy sign for the housing market. One economist says, the sooner housing corrects to a more sustainable growth rate, the better it is for the greatest number of buyers and their price expectations.