With all the news about the housing recovery, many first time home buyers are wondering is the recovery sustainable and is this the right time to buy my first home?
Sustainable housing recovery depends on a number of economic factors. Here are five that indicate this recovery may indeed be sustainable.
Housing affordability is attractive - How attractive is it? The average payment on a median priced home last month, assuming a 10% down payment and not including taxes or insurance, fell to $720 at prevailing rates, down from nearly $1,270 at the end of 2005.
Household formation is revving up - The U.S. is on track to add 1 million new households this year, up from 630,000 last year and an average of 570,000 over the past five years. The upshot is that some pent-up demand is being unleashed, in part because job growth has picked up.
Rents are rising - Falling mortgage rates and improving job growth didn’t do much for housing last year, in part because buyers didn’t have much confidence or urgency. Rising rents have changed that. Initially, they spurred more investor purchases of properties that could be rented out. More recently, they’ve given buyers a reason to get off the fence.
The share of distressed sales are down sharply over the past year. Why are distressed sales falling? Banks slowed down foreclosures as a result of the robosigning scandal, and they’ve stepped up foreclosure alternatives, notably, by shifting short sales into a higher gear.
Inventories of homes for sale have plunged. Inventories of existing homes for sale are near a 10-year low, and down by one third over the past two years. Demand is exceeding supply and that always puts upward pressure on prices.
This isn’t to say housing is out of the recovery ward, nor is it to say that these signs of recovery will continue indefinitely (fiscal cliff). But for right now the signs all point to a healthy housing market.
We have helped hundreds of first time home buyers and their families make the right home buying decision and they all have one thing in common, they contacted us.
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