Almost all potential home buyers would love to know when it is the best time to buy and since no one has been able to produce a working magic crystal ball that can predict or time real estate markets correctly... nationally, locally, or otherwise... it still only seems to be an educated guessing game at best.
However, one thing is for sure... your local real estate market will finally bottom out at some point and it will be hard to tell it has occurred until prices and sales volume start to rise again.
That's why the best time to buy is when market conditions just "suggest" a bottom... and here are a few tell-tale-signs that we have once again reached a market bottom:
1. More jobs are available and being filled
Total non-farm payrolls rose by 217,000 in June, and the national unemployment rate is currently at 6.3 percent according to the U.S. Bureau of Labor Statistics. Employment increased mostly in the general business and professional sectors, health care and social assistance, food services and drinking establishments, as well as warehousing and transportation.
2. Real estate is a fantastic hedge against inflation
The May Consumer Price Index (CPI) was up 2.13 percent year-over-year. The index for all items without food and energy rose 0.3 percent in May, its largest increase since August 2011.
So it is a pretty safe bet that the accelerating cost of things, otherwise known as "inflation", will also include housing. You surely will be paying more for goods and services in the future, but if you are a home owner, you will surely be better off financially... simply because a major asset such as a home, purchased at a fixed cost, becomes automatically more valuable when prices inflate.
3. Housing price increases are currently slowing
The median existing home price for May was $213,400, that is an over 5 percent year to year increase. Just compare that to the national median existing home price of $158,800 registered in January of 2011. That was when the PMI Insurance Company stated that home prices relative to income were way below market fundamentals. Prices had over-corrected downward during the recession, and then they soared back by the double-digits in 2013.
Now of course, housing is correcting downwards once again from that 2013 upward over-correction... and that makes today's market a great time to buy.
4. Mortgage interest rates are still low
During the recent recession, mortgage interest rates for a conventional 30-year, fixed-rate loan, averaged about 4.32 percent. Now today's rates are still pretty close to that and there is no more recession to speak off... and this scenario means mortgage rates have nowhere to go but up.
5. Pent-up and future demand keeps growing
Since the recession, new household formation fell dramatically to a single percentile (1 percent) of the national population. However, the largest generation ever... the 81 million Echo Boomers... are now over 30 and they are starting to form their own families. This alone should bring the household formation numbers closer to the 2.3% annual growth of the 1970's, when my generation of 78 million Baby Boomers reached adulthood.
The National Association of Home Builders (NAHB) estimates that about 2.1 million household formations were delayed due to the recession... which may have ended some time in 2011. Now, that constitutes plenty of pent-up and future demand for housing which should continue to drive home prices higher in the years to come.
6. The final assessment
As long as I can think back housing market recoveries never ever occured in a straight line. There were, and always will be, surges, blips and dips.
Therefore, home shoppers could of course try out their own magic crystal balls to pinpoint even better conditions... but the present alignment of low mortgage interest rates, slowing home prices, and somewhat larger selection is highly unlikely to reoccur.
And while this may not be the final bottom, it's close enough...
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