For the past few months, news out of the United States real estate market has been that the market is healthy and that it is a seller’s market. Much of the inventory that is available is quickly being snatched up due to low inventory numbers and there is a lot of buyer competition. But, it’s not often that real estate market conditions remain the same for too long and it looks like that might be the case again as changes in the market come sweeping through.
Part of the reason that the real estate market has been so hot is that mortgage rates had been significantly lower than they had been in recent years. However, earlier this month rates started creeping up. The reverse in mortgage rates will definitely impact the market in the form of reduced mortgage applications and an increase in declined applications. Both of these factors will lead to a decrease in home sales over time.
Another indication of the direction of the housing market is who has been responsible for the increase of home purchases. The driving force behind quickly moving homes has significantly been investors as opposed to private home buyers. In some of the hottest real estate markets in the country, such as Las Vegas, as much as 60% of property is being purchased by investors. Some are professionals who invest in property for a living and others are newcomers to the game. Either way, the fact that the market is moving significantly by investors could mean trouble when the market starts to reverse.
Although mortgage rates and investor behaviors will significantly impact the housing market, it’s too soon to predict a complete crash of the housing market. The economy is creating more jobs than it has in years. This is usually a good indication of future home purchasing behavior. A low employment rate, 7.5 percent, is the lowest it has been since 2008, which is another indication of a strong housing market in the future. Pending home sales are also on the rise which means that the number of closed and completed home sales will continue to rise or go even higher than recent numbers. There is also a build up of demand. People who haven’t been able to find the home of their dreams have decided to hold off so there is a queue of people who are financially able and ready to buy a home, there just needs to be enough homes to meet their demand.
It’s hard to predict exactly what direction the housing market will move and at what pace. Variables that are also contributing factors to the U.S. economy are a good indication. Based on what the U.S. is seeing right now, if you want to invest in property, it might be the time to do so before momentum takes the housing market completely in the opposite direction.