A Housing Bottom?
The last two years have been rough on housing in a chain reaction-kind of way.
First, mortgage guidelines tightened, preventing some homeowners from ditching onerous ARM products. That sparked a foreclosure boom that led to large losses on Wall Street. In turn, it sank the U.S. economy.
Today, as compared to 3 years ago, foreclosures are way up, home values are way down, and mortgage rates are as low as they’ve ever been. It’s wonderful news for home buyers — there’s a plentiful supply of homes and financing is cheap. Home affordability is near all-time highs. But the market is changing. Massive, sustained government stimulus has helped reverse the economy’s slide. There’s still some rough patches, but overall, prospects look bright for 2010.
In housing, we can already see the improvement:
- The supply of new homes is down 40 percent this year
- The number of existing home sales are soaring in Cincinnati and other markets
- Pending home sales are as high as they’ve been since 2006
Furthermore, home prices are on the rise in the majority of U.S. markets. The Buyers Market is fading, folks. If you bought a home in February 2009, pat yourself on the back — you timed the market bottom pretty well. Both home prices and mortgage rates were bottoming that month. Since then, however, it’s been a steady erosion and home sellers are psyched about it and therefore less apt to give their houses away. It’s important to remember that in contrast to this information, there are still record levels of foreclosures and jobless claims.
For today’s home buyers, mortgage rates remain low and home prices have a lot farther to climb. Homebuying conditions may not be as perfect as they were 9 months, but, as compared to what we’ll see next year, they’re pretty excellent. Especially because mortgage rates will cross 6 percent soon.
Just be cautious. The number of homes sold may be on the rise, but prices still seem to be suffering a bit. The market could be poised for another drop though after this relatively short-term response to government stimulus packages, low interest rates, and lowering supply. The bottom line is still crunch the numbers and work for the best deal you can get.
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