Where Will Home Prices Go Now?

There is a brisk life of home sales after the great recession.  With unprecedented low interest rates fueled by signs of a growing economy, buyers who can buy are doing just that–buying a home or buying another home.

According to the National Association of REALTORS® home sales across the U.S. are up 1.5% average across the Northeast, Midwest, South, and West regions between 2015 and 2016.  Existing home sale prices are also up 3.7% from this time, last year.

There is also a shortage of supply to meet the demand of the buyers who are ready, willing, and qualified to buy.  Currently there are approximately 4.4 months of inventory available on the market, across all regions. What has happened, according to some analysts is this lack of supply, paired with low mortgage rates has created a market of overvalued properties, much like we saw in the early 2000s during the subprime lending boom of 2004-2007.

According to housing analyst Marc Hanson, housing prices are about 25% to 60% above what the fundamentals of the U.S. economy can justify. In the article, it alludes back to the last bubble and anyone who went through that take Hanson’s arguments seriously. While the real estate market has returned to some normalcy in terms of price appreciation while mortgage lending guidelines have not relaxed much there still is cause for concern, namely in the overall economy of U.S. wages (Fortune, Jan. 11, 2016).

Since it is an election year, we will likely not see an increase in mortgage interest rates. After November, it’s anyone’s guess what will happen. If rates go up and values stay where they are, it may be more challenging to qualify for a mortgage, if a buyer has student loans and other debt.