Any seasoned real estate investor can tell you that if you want to make the most effective moves in the U.S. housing market, you need to know how to read it. This invaluable skill will make all the difference in your future property buying endeavors. We’ve listed several signs that indicate a strong U.S. housing market for you to keep in your back pocket so when the time to buy or sell your property is right, you’ll know.
7 Signs of a Robust U.S. Housing Market
Low Mortgage Interest Rates
Low home mortgage rates indicate a positive time in the U.S. housing market. Mortgages are backed by a number of different bonds and securities which affect mortgage rates, as seen with 10 year treasury and mortgage rates. 10 year treasury bonds are seen as safe, long term investments that investors like to purchase when the economy isn’t all that promising.
Given the state of the economy due to COVID-19, the Federal Reserve began buying bonds backed by home loans in March of 2020. The demand for 10 year treasury bonds soared, decreasing the yield and lowering mortgage interest rates below 3 percent.
2. High Demand, Low Supply-year
The law of supply and demand tells us that as a price increases, people are willing to supply more and vice versa when the price falls. Much like 10-year treasury bonds, a high house demand and low supply of houses to buy is a good sign for the U.S. housing market. When the number of buyers outweighs the limited inventory available, for sale signs start to vanish and homes tend to sell quickly. In fact, as of October 2020, the number of homes sold year-over-year rose to 22.6 percent while the number of homes for sale year-over-year dropped by 36.4 percent. This decrease in home sales could be due to homeowners taking advantage of attractive refinance mortgage rates rather than purchasing a new home at an increased price.
With work and school-from home orders set in place for the foreseeable future for many, the need for more space at home has been exacerbated. Families who could once co-inhabit small dwellings in the city are finding little room to breathe and therefore moving to areas of the country with a little more leg room. This has also led to the next sign of a robust U.S. housing market, new construction.
3. New Construction
Housing starts, AKA new residential construction projects, are a key economic indicator and a good sign of a strong U.S. housing market. In a strong economy, people are more likely to purchase new homes. New data released by the U.S. The Census Bureau revealed that in just one year (October 201-October 2020) the United States experienced a 41.5 percent increase in new construction home sales.
4. Increase in Jobs, Income
In a strong job market (or at least one that is recovering), the U.S. housing market is also strong. Homeowners can size-up or build new, purchase second homes or investment properties and less homes go up for foreclosure. First-time buyers have more confidence and funds to purchase a home with a steady stream of income.
5. More Buyers in the Market
When more buyers in the market drive a larger demand for homes the U.S. housing market gets stronger. The National Association of REALTORS’ Housing Affordability Index (HAI) measures whether a typical family (defined as one earning the medium family income reported by the U.S. Census Bureau) can qualify for a mortgage loan on a typical home. As the percentage of buyers who can afford to buy homes increases, the income required to qualify for a mortgage is lowered. This helps gauge and track the affordability of homes in the market.
6. Upward Trending Home Prices
Home prices trending upward are indicative of a strong U.S. housing market. With little supply available, demand becomes greater and in turn drives up home prices. To see which direction home prices are trending, simply compare median house prices from a year ago to now. For instance, home prices nationwide were up 14.9 percent to $335,454 year-over-year in October 2020.
7. Less Distressed Sales
During hard times, homeowners might find themselves in circumstances beyond their control and conduct a short sale or foreclosure (2009 housing market crash, anyone?), a bad sign for banks, investors and the economy. When foreclosures and short sales, AKA distressed sales, start to dwindle, homeowners can sell their homes (with equity) and not lose out, making it not only a great time to buy a home, but to sell a home as well. As of September 2020, foreclosures were down annually in every state.
For answers to your burning mortgage questions or to find out more about how our digital advantages save you time and money at the closing table, contact one of Wyndham Capital Mortgages seasoned loan officers. You’ll be glad you did.