In the post 2016 election world, we were all anxious to see how a new President would affect the housing market. So I began reading and researching and my advice is still to ignore the major news media like CNBC (which seems to be the worst as alarmists in my opinion) and others that are proclaiming that an "interest rate soar to 4%" is due to Trump being elected". If you ask local mortgage bankers who have been assisting clients with loans, that is far from the truth.
In fact, since mid year this rate and even higher have been in the works. And here is another thing, the news media is also brainwashing readers (or watchers/listeners) that Trump intends to make housing less affordable for the average American. This too is speculation and honestly still the media trying to punish Trump for winning in spite of their anti-Trump campaigns. My advice, stop listening. If you have any desire to purchase a home or move up or downsize, go see a local mortgage banker, find a good realtor, and see if it's the time for you.
You may need to set aside funds to update to a 21st century home. Realtors are in and out of homes everyday and should be able to easily tell you which renovations bring the most attention to make you the "hot new listing". Supply and demand have bell curves. From the time I started as a Realtor in 2003 until we were in the depths of the "bubbles end" in 2011, and even in to early 2012... Regardless of the interest rates which were around 7.5% when I started in the biz... In our area it was a Buyers market. There were always several, if not many, pre-owned homes to choose from and we rarely, if ever, saw multiple offers. There were even government perks to home buyers that gave them anywhere from $4000-$8000 to buy a home from 2006-2009. So anyone holding a steady job could, many times at a higher interest rate with lower scores, could buy a home, many with $0 down.
By 2013, a change occurred. Many folks were recovering from job losses or hardships that had them losing their homes and participating short sales to avoid foreclosure. Those that hung on thru that storm found that they had been living in their homes much longer than they expected to (stats then were predominantly home owners sold and moved every 7 years). Less owners were putting their homes on the market and regulations to get a mortgage loan changed. Buyers who once controlled the market were starting to have to compete for the best listings. Many of the foreclosed homes that were a result of the market crash and honestly a result of loose mortgage loan requirements, were bought up either by savvy and handy home buyers or by investors to resell or "flip". In the midst of all of this, the media (news) was no longer promoting home ownership. In fact they were spewing that new rules caused ALL home buyers to have 20% down. They kept bringing bad news of the housing "bubble" and reported on what made the advertisers happy...gloom and doom. I will tell you folks this was NEVER true.
There were other loan alternatives all the way thru this that allowed for 3.5% down with FHA and still $0 down with VA and USDA (not available in all areas). I cannot tell you how many times I literally yelled at the television when I would hear the 20% down statement. It was just not true...period. But, the media was wrong again, and in spite of them people still wanted to own their own homes. In fact people still bought and sold homes. But by 2015, those folks that "stayed put and weathered the housing storm" started looking to see if they could make a move and what was out on the market. With the low supply of homes (and a supply of outdated homes), many looked to building. Hence the recent building boom. So the homes they sold have supplied some first time home buyers (and some second home buyers as they moved up from smaller homes) but at a much slower pace than before. So supply and demand brought the market back with higher prices that creeped up at first.
Then housing prices gained and came back up, and in some cases, even higher than the peak of the prices in 2005. So guess what? Prices NEED to level off. There are once home owners that are now renting, but not by choice, because they wanted to take advantage of getting the most from their home, but could not find the next one to purchase due to slow supply. And there are owners ready to sell their very nice first homes if they can find the right preowned or new build location. We watch...we wait. What will cause prices to level off? Higher interest rates....not crazy high (like 18.5% when I purchased my first home in 1985), but between 4-6% as opposed to 2-3%. This will cause prices to come down so that payments are affordable. Higher rates mean that a buyers monthly payment affordability goes down, so they would need to buy a less expensive home to keep a payment the same. With lower rates they can pay more, with higher rates they can pay less. It's all in the math.
AND you know that spike in business that the Home Depot and Lowes are enjoying? Well, this, and happily busy renovator contractors, is indicating that homes built from 1980-2007 are getting face lifts. Some for the enjoyment of their owners, but now many for those owners to sell and move on. So those that held onto their homes beyond the average 7 years either have made the home what they want it to be for the next decade or are contemplating selling and moving on to their next. Those that have outgrown their first home will get it together to sell, and many of those owners have raised a family and are looking to move on and retire. Either locally to a ranch style home or condo or move to a dreamed of and highly desired retirement destination.
Most home owners have 2-3 homes in their lifetime. We as a society, are working longer into our years and many because they have healthier lifestyles or out of necessity to have the things we want (or funding our kids college education) and even some folks are not desiring a true "retirement". We like to stay busy, be useful and earn money. Also the cost of health care and the contemplation of needing this as we grow older looms and can also delay plans to retire (but that's another soap box I will not step on to here). So my prediction of what we will see is initially a loosening up of the market and more nicely renovated homes will come on to the market. Buyers will still initially compete and pay the higher prices. But by late 2018, I can see there will be more on the market and eventually (because every market is cyclical) we will start to see the market level and turn back to more of a buyers market. With rising interest rates and more supply of homes for sale, buyers will have many more choices. Economists have been predicting for several years now an overstock of larger 4 bedroom 2 story homes.
Today it seems sure on the horizon that employment will soon recover and consumer confidence will become strong. Hopefully we do not see lenders do crazy things and make requirements for mortgage loans so loose that we see again the beginning of a "bubble". Watch for the ads for people to get approved with lower credit scores, and beware of the home equity lines and reverse mortgages that turn your house into a bank.... None of these things are healthy for your wallet or the economy.
Overall, my outlook for the next 4 years is a good one. It will be a slow and steady leveling of home prices and interest rates making payments affordable. Our next generation of home buyers have more financial education and common sense. Hopefully we have learned from the years past how to have a healthier housing market. Building "booms" going on now will hopefully not outgrow the number of qualified home buyers. There is already an overstock of newly built higher priced homes, and we will see more of them when the interest rates increase. In the event the drought of homes for sale continues, perhaps the government will put the shoe on the other foot and provide incentives for SELLERS to sell (as a stimulus for the market). This is just in theory, as I truly think the uptick in home improvements will result in more homes on the market as early as 2017.
People want to move on to a home best suitable for their lifestyle changes. But owners thinking about a move soon be aware that at some point you will have missed the party with the higher prices. We are already seeing an overstock of overpriced homes. Please be realistic in what you can expect for a return on your investment. You may sell at a price higher than you ever expected, but that can be a "wash" going into your next home. For today, appraised prices are recovering very nicely and it is looking like 2017 will be a fantastic year to sell.
Call a local experienced expert and check on the values at specific price points in your area. There can be changes going on you are not aware of. If you are in the central Ohio area, I am happy to help. For a free no obligation consultation to assist with your real estate planning, give me a call at 614-440-5174 or write me at firstname.lastname@example.org.
Vicki Workman has been selling real estate in the central Ohio (predominantly Marysville/Union County areas) since 2003 full time and is certified by the National Association of Realtors as an ABR, CRS, GRI, E-Pro and CNHS. Member of the Columbus Realtors Presidents Sales Club selling over $30 million in residential transactions and helping more than 425 clients. In addition to financial and pricing consultation, she also provides sellers with valuable tips to design their home to sell for top dollar in todays market.