I was playing golf with a couple agents in Seattle last week. We were talking about the market (big surprise), and the reasons for the strong surge of buyer demand over the last few months or so. Of course, it does not come totally unforeseen as to where the demand is coming from when you look at the facts, but, in my mind, the psyche of the consumer seems to be the real question at hand.
Affordability is at its all time high (http://www.realtor.org/topics/housing-affordability-index/data): rates are at all time lows and home prices have dropped even more to more affordable levels (and may even drop a little more depending on what market area you are in). Also, inventory is much lower then last year. So, there are less homes for buyers to choose from, which is adding to the stronger sense of demand (playing a little more into the Sellers hands). You can maybe even make a case for improving domestic economic conditions, but this basis seems a bit far fetched for me at this point in time within our economic turn around.
Aside from the much lower inventory, the affordability index (low rates and current home prices) has been lingering around at all time highs for quite some time… So, why are consumers going crazy now? My theory is that it takes longer for ideas to settle into the general consumer psyche; we are generally slow to respond as a public. Everyone has a hundred different things going on in their personal life each day that can hold a higher priority, then the understanding that now is the perfect time to buy.
There is no question that interest rates hold a very important role in this buyer demand. If rates have a knee jerk increase in the near term, I see the buyer demand losing its steam. And to get back to my golf game with the agents… one of the agents I was golfing with (a long time, high producing agent in the area) feels as though a tick up in rates will actually increase demand, pushing potential home buyers to act quicker before rates go up any higher.
This is all just food for thought. It will be interesting to see how this market works itself into another part of its life cycle. If you are looking to buy (or refinance), then please give me a call and we can talk about what you are looking to achieve, etc.