What do YOU Need to be an Intelligent Home Buyer or Seller in Springfield?
To be an intelligent home seller or buyer in Springfield Township, Delaware County, Pennsylvania it is important to understand current trends in sales (volumes and prices), current inventory (amounts and trends) and mortgage interest rates. Like the fellow says, if we do not know where we have been, it is real hard (I would say impossible to say where we are going). Or stated another way, if we do not study history, we are condemned to repeat the mistakes of the past.
What is the History for Home Prices?
As in most of Delaware, Chester and Montgomery counties, Springfield average single family home prices peaked in 2006/2007 at $300,000. There were gradual annual declines from then until 2012 when prices bottomed out at $262,000. That was a total decline of 13% or $38,000. Significantly less when compared to some other areas like Radnor which saw a smaller % drop (8%) but a lot more money ($118,000).
What is the History for Home Sales?
As the prices went South, so did the numbers of sales. For example, Springfield Township sold 292 single family houses in the peak year of 2006. That hit a low of 177 houses (down 39%) in 2011. Since then, numbers of sales have rebounded back up to close to the peak (277 houses in 2013) but prices have not moved much at all (level for the last 3 years at about $264,000).
Why Would Numbers of Sales Go Up and Prices Stay the Same?
Prices of homes, like anything else, are driven by supply and demand. Please check out the below graph for a visual explanation of how this applies to houses.
If we have only 1-5 months of inventory, we would be in a strong sellers market where buyers outnumber sellers and there is upward pressure on prices. This is the situation we were in from about 2000 to mid 2006.
If we have 6+ months of inventory, we are in a buyers market where sellers outnumer buyers and there is downward pressure on prices. This is the situation we have been in from mid 2006 up to the end of 2013.
Naturally the higher the inventory, the more downward pressure we have on prices.Since 2006/7, we have been in an era of declining prices. Reason is that inventories have been at 6 months or more. In many cases, much, much more. For example, in all of Delaware county in 2011, average inventory was over 13 months. We are now at about 6 months and declining.
What Does This Mean for Prices?
In Springfield Township, we now have only 4.7 months of inventory and prices have been level for about 3 years. That should mean that we are on the verge of a strong sellers' market which will send prices up, probably by a lot.
In Radnor Township we have a similar situation. Only 3.4 months of inventory and prices that have been level for 3 years. Again, that should mean that we are on the verge of a strong sellers' market which will send prices up, probably by a lot.
What Does This Mean for the Cost of a House?
Cost is different from price. How is that you say? Well, unless you are are paying cash, you will take out a mortgage. Mortgage interest rates are rising right now and are predicted to continue in that direction.
Interest rates right now are at about 4.25%; above table says that we will probably hit about 5.25% in a year. If you are that move up buyer and plan to borrow $400,000, if you pay 4.25%, your monthly principal and interest payment will be about $1,968 per month. If you pay 5.25% your monthly principal and interest payment will be about $1,968 per month $2,209 per month. That is a difference of $241 per month or $2,890 per year.
If your present house is worth $300,000 and your dream house is $700,000, both are increasing at the rate of about 5% this year. That means yours will go up by about $15,000; the house yoiu want to buy will go up by about $35,000. Waiting only makes it more expensive.
So, what are the bottom lines:
- Home prices in our area declined from 2006 to 2010; they have been basically flat since.
- Inventory levels predict that we are going into a sellers' market with rising prices.
- If you are a move up buyer, the price of the more expensive home that you want is going up faster than the house you live in now.
- In addition to rising prices, interest rates are rising. A year from now they will probably be a full percent higher than now. That will raise your principal and interest payment by 10%.
- Stated differently, if you are a move up buyer, every day you wait makes your transaction more expensive
The lesson, IF YOU ARE GOING TO BE A MOVE UP BUYER, THIS IS THE BEST OPPORTUNITY YOU WILL HAVE IN YOUR HOME BUYING LIFETIME. IT IS NOT AS GOOD AS IT WAS A YEAR AGO WHEN INTEREST RATES WERE AT 3.25%, BUT IT IS BETTER NOW THAN IT WILL BE NEXT MONTH, NEXT YEAR OR 5-10 YEARS FROM NOW. Please click here if you would like to get a sense of the things you need to consider as you decide to move up, downsize or stay where you are.
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