The Market for Spring Home Sales: A Peek-a-Boo Situation
The Market for Spring Home Sales might be good or bad, depending on whether you are a buyer or a seller. As we did last week, we are currently focused on sellers. So let’s take a look at the housing market before we explain the “Peek-a-Boo” term in our title.
The Market for Spring Home Sales: Big Hints
What is the asking price of your home? Is it at or below the US median price? In case you did not know, the current U.S. median price is about $250,000. If you are selling a house in that price range, be prepared for good fortune. Palm State Mortgage predicts you will see a big demand for your home.
“According to Lawrence Yun, chief economist for the National Association of Realtors, “For anything below the median home price, there will be strong demand.”
Reasons for the Unusual Spring Home Sales Market
By the way, the spring market is the March through June period. This is the time when more than half of U.S. home sales take place. The good news for the above mentioned lower end part of the Market for Spring Home Sales revolves around two current conditions:
1. Currently, there is good news in the jobs market. Wage growth is a bright spot in the economy for first-time buyers. Likewise, wage growth is influencing some buyers in the Spring Home Sales market.
2. Secondly, we are seeing more buyers tempted to move up to better housing. U.S. wages increased an average of 3.2% in March from a year ago, according to government sources.
3. Additionally, we are still enjoying reasonably low mortgage rates. In Contrast, What Is Happening to the Higher End Home Sales?
When we look at the high end of the market – homes priced above $750,000, Palm State Mortgage Company grows a little less optimistic.
Experts reveal, “On the upper-end things will be softer. Therefore, it will be a bifurcated housing market in 2019 and probably into 2020.”
Are Mortage Rates Again to “Blame?”
The story behind the softened upper-end market also features mortgage rates. You see, the Mortgage rates quite unexpectedly began declining at the beginning of the year.
1. This stoked the demand because more home buyers came into the market.
2. Home Sales expert Yun said, six months ago, he thought mortgage rates might reach 6% this year. However, he’s now calling for rates to stay in the 4% to 4.5% range.
High-End Spring Home Sales: Blame Not the Mortgage Rate for the Slump
Mortgage rates notwithstanding, much of the softening at the high end is due to something that might be of major concern to many of our readers: Taxes.
- The federal tax caps mortgage deductions at $750,000. Do you see how that correlates to the high-end slump?
- And the same new laws limit the deductibility of state and local taxes – known as SALT. Likewise, this correlates with the slump because you don’t really want to go beyond the deductible tax amount.
- Thus we know that capping property tax deductions is going to reduce demand, especially for people living in New England states or other areas, such as California, where those taxes are higher
Bifurcated Spring Market: Will It Indicate a Recession?
Yum called this lop-sided market “bifurcated.” We call it peek-a-boo because your enthusiasm for it depends on which level of homes you are peeking at. On the one hand, you could perceive a strong market for spring home sales. But only if you are looking at homes at the median level or lower. If, on the other hand, you are looking for a house in the upper-level range over 750,000, you might be discouraged with higher prices and fewer available choices. So, we call it a peek-a-boo market.
Is it Possible to Even Out the Market for Spring Home Sales?
Experts have said that one key feature in our Peek-a-boo market is that we need more homes to be built. “…homebuilders have to build more homes to meet demand, and anytime housing starts are rising, it’s hard to see an economic recession occurring,” said Yun. Housing starts are currently expensive.
Experts report we will probably see 1.3 million housing starts this year and 1.4 million in 2020. That won’t change the bifurcated market this spring, but it does look good for the economy. Our Housing wire Expert, Yun explained, “The builders haven’t fully recovered from the housing crash,” he said. “They are taking small, incremental steps and that’s why we are having a shortage of housing across the country.”
If homebuilders don’t ratchet up production, it will make home prices even more unaffordable for first-time buyers, Yun said.”
Our Terrific Take-Aways
So the financial sector has warned the homebuilding sector to get busy. It looks like prosperity is warming up the home sales situation. And if you’re on a budget, staying under that median margin, you could find your dream house. The down-side is that you will need to hop into gear quickly to take advantage of the peek-a-boo Market for Spring Home Sales before the supply of houses runs out. “Be Quick—like a bunny,” seems like an appropriately spring themed comment for house hunters.
Thank you for reading the Palm State Mortgage Company Blog and “Happy Spring House Hunting.”