Top Real Estate Trends Causing a Buzz this Spring

As we all know, the proverbial bottom fell out of the real estate market about half a decade ago. Home values, for the most part, have always climbed and dropped along with fluctuations in the economy; however, the fall of 2007 was significantly worse than what the market had seen in the past.  This was due, in large part, to artificially high rates of home price appreciation that preceded the fall. Now, six years after the bottom fell out, real estate market trends are beginning to show significant and steady signs that the market is rebounding.

Rising Home Prices

For home buyers, the news is good. Despite homes in many markets losing as much as half of their value when the bubble burst, a recent study predicts that home values will steadily rise at an average of 3.7 percent per year over the next five years. In fact, the increase in median list price over the last year in some markets have been nothing short of astonishing. Several cities in California, including Riverside, Orange County, Oakland, San Francisco, Sacramento, and Santa Barbara, saw increases of 20 percent or more in median list prices from the same time last year. While other markets may not have seen such dramatic increases, most have seen a steady rise, which bodes well for the future.

Declining Housing Inventory

Another trend that contributes to the health of the real estate market is a decline in inventory. Inventory is declining for a number of reasons. First, the cost of materials has gone up making it more expensive to construct new homes. In addition, many existing home owners are reluctant to upgrade to a larger home as was the case in the past because the value of their existing home has declinezid, leaving them much less equity with which to “trade-up”. Finally, a marked increase in “starter” homes has also led to a shortage of supply. According to the consulting firm Deloitte, entry-level purchasers accounted for 34 percent of purchases last July, yet the supply of low price single family homes is not keeping up with the demand.

Although home buyers may consider this a bad thing, overall it contributes to the health of the market because it eventually results in increased home values. As the law of supply and demand dictates, when supply is low and demand is high, prices go up. For those whose home values plummeted during the recession, this is good news. For those who are considering a home purchase, this means that now may be the time to do so while home prices are still historically low in many markets.

Increasing Mortgage Interest Rates

The final indicator commonly used to evaluate the overall health of the real estate market is where interest rates are and where they are heading. Interest rates hit historic lows during 2012; however, experts predict that they will begin to rise during 2013. Initially, the rise in interest rates will likely cause an increase in sales as people try to lock in the current rates. That, in turn, will contribute to the declining inventory of available homes as well as push values up.

Overall, recent trends in the real estate market indicate that the market is finally rebounding across the nation. While there are still several areas throughout the country where bargains can be found, those will become less and less common in the coming months according to experts. Therefore, if you have been contemplating the purchase of a home, now may be the time to act before inventory becomes scarce and prices and mortgage rates go up.