Economist Sara Zervos shares some excellent news for the U.S. housing market – and anyone who’s planning to sell or purchase a home – in this Forbes article.
If you live in Coastal California, you don’t need national housing statistics to tell you that the housing market is in good shape – stick a “For Sale” sign in the yard and there are dozens of offers within a few days. If you are a seller or homeowner in the some of the less-than-hot spots, you can still take some comfort from the majority of indicators that suggest that the market is not only solid, but still improving. Worries about the state of the economy and the stock market justifiably create some jitters. However, the factors that positively influence real estate, such as employment, interest rates, and low inventory, are likely to trump the detractors looking ahead into 2016.
The most closely watched index on home prices is the S&P/Case Shiller index, which showed home values improved by over 5% at the end of 2015 compared to a year earlier. The 20 large city index they track showed a higher climb in prices, closer to 6%. Inventories have been somewhat smaller than normal so buyers have been chasing fewer houses and driving prices up. More sellers are likely to emerge in the coming months to take advantage of these higher home prices.
The housing crisis that was the epicenter of the 2008 crisis has almost finished healing. The massive overhang of foreclosures has nearly cleared, and new foreclosures are back to a long run average. There is also less debt in the system, as distressed homeowners had to sell, and also since many have shifted to renting given tighter lending standards. With less leverage in the system, we can expect less turmoil induced by a cyclical slowdown in the economy.
The largest positives for the housing sector remain the ongoing gains in employment (and income) and very low mortgage rates. Despite the overall recovery in the economy that has induced the Federal Reserve to hike interest rates, long term rates remain very low, dragging mortgage rates back down to historic lows.
