Real estate prices have been going up, and for some buyers it will be more expensive to purchase a home than it was a year ago. For some sellers who have ben stuck in their starter homes and who want to move up, the rising prices and current interest rates will be a boon. But perhaps not for long. As more people are employed and with the chance that incomes may rise this year, that means the Fed is likely to loosen its grip on short-term interest rates. Which also means that long-term interest rates, like mortgages, are likely to rise as well.
The higher interest rates coupled with rising home prices can make it more challenging for people to enter to the market. Right now is a good time to go ahead and make that purchase if you have been holding off for a while.
Realtor.com just pushed out a post about this very subject:
“1. Rates are going up
After years of record-low interest rates (hello, 3%!), the Fed is finally making some noticeable increases: The rate for a 30-year fixed mortgage broke the 4% mark last year. And with economic growth continuing to carry momentum, Vivas predicts we’ll see at least two to four more rate increases throughout 2018. Rates are anticipated to hit 5% by the end of the year.
“The big story there is that those increases will further constrict affordability,” Vivas says. “The more buyers wait, the more expensive it will get to buy—not just because of home prices, but because of inflationary pressure.”
In other words, if you want in on the American dream, now might be the time.
2. Prices are climbing, but not crazily fast
Home prices have soared over the past few years, pricing otherwise well-positioned buyers out of high-cost areas and leading some experts to cry “bubble”. But in 2018, price increases are expected to moderate.
Vivas forecasts a home price increase of 3.2% year over year, after finishing 2017 with a 5.5% year-over-year increase. Existing-home sale prices are predicted to increase 2.5% year over year.
Of course, it all depends on where you live. While red-hot markets such as San Francisco are predicted to finally lose some steam, sales numbers and home prices are poised to climb in Southern states such as Texas and Florida, where economic momentum continues chugging along and new construction is happening in the right price points.
So what does that mean? Basically, home prices will still increase, but not at the same pace as they have over the past few years.
3. Inventory levels will begin to increase
An inventory shortage has plagued the U.S. housing market since 2015, forcing some buyers to settle (a tiny house with linoleum floors for $1 million, anyone?) and keeping others out of the buying game entirely. But by fall 2018, the tides will begin to turn, with markets such as Boston; Detroit; and Nashville, TN, recovering first.
The majority of inventory growth will happen in the middle- to upper-tier price point, in the ranges of $350,000 and $750,000 and above $750,000, Vivas predicts.
New home construction is also expected to expand. But that will happen slowly, thanks to a constricted labor market, limitations on the amount of lots and land that’s available, tight bank financing for building loans, and a run-up in building material prices, says National Association of Home Builders chief economist Robert Dietz.”
The good news is there is plenty of new home construction happening within a 40 mile radius of Vero Beach, so inventory may not be as critical. Even if you aren’t quite ready to pull the trigger on a home purchase, it could be a good time to put a deposit on one.