Do you understand these three terms?
By reading this post you'll gain a useful understanding of these three terms-housing supply, housing demand and housing affordability-that thousands of first time home buyers and soon to be home sellers may hear talked about, but not fully comprehend.
1 - Housing Supply
Housing supply measures how many months it would take to sell all the houses currently listed for sale, at the current pace of home sales. For example, if there are 600 homes currently listed for sale, and an average of 100 homes are selling each month, there would be a 6-month housing supply. This is because it would take 6-months to sell all the homes currently listed for sale.
Housing supply has been running below 6 months across the US since 2012. This indicates a seller’s market. In many parts of the country, buyers are competing with multiple offers… in some cases dozens of offers on the same house. This tells us that house prices are poised to continue going up in the next several months.
2 - Housing Demand
Housing demand tends to slow down in the winter because most home sales occur during the spring and summer. Even so, housing demand is expected to remain strong because the economy is doing well and people have jobs in most parts of the country.
3 – Housing Affordability
Even with the recent uptick in mortgage rates, buying a house is more affordable than renting a house in most parts of the country. In fact, lending guidelines for buyers who use a 3% or 5% down payment have recently been relaxed.
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