What Does Low Inventory and Rising Home Prices Mean for Home Buyers this Spring?
For those who have been looking to buy a home this spring, most likely you have already been bombarded with a lack of inventory and higher home prices. We all know the concept of supply and demand; because the supply of homes is low, we’ve seen a boost in home prices. But why is supply so low a few may ask?
Why is Housing Inventory Low?
To put it simply, housing inventory is low because the economy is recovering slower than it has with past recoveries. A slow recovering economy means slower new housing starts. Chris Trapani of Sereno Group elaborates further in his recent article when he says
“Over the past seven years (since the beginning of 2008) there has been an unparalleled low level of new housing starts. This prolonged decrease in new home development dramatically multiplies the low-inventory gap. To further the dilemma, the start-to-finish build cycle is lengthy, often requiring multiple years to plan, approve, build and market, which slows market momentum. Until the new housing development engine gets moving at an accelerated pace it will continue to have a lingering impact.
In short, builders and land developers have been playing catch up for the past few years and it’s not as simple as building more houses now. Housing developments take years to plan and once that momentum is slowed down because of lack of confidence in the housing market; builders end up playing catch up for years to follow.
So now that we know why inventory is low, and that prices are rising as a result of that, let’s dig a little deeper on how much prices have been rising.
How Much Are Prices Increasing?
The average price of existing single-family homes sold in King, Snohomish and Pierce counties climbed 9.9 percent over the year in December, its fastest pace in 2015. In the 20-city index, Seattle trailed only Portland (11.4 percent), San Francisco (10.3) and Denver (10.2) in annual price increases. – Seattle Times
It’s a little comforting to know that Seattle isn’t the only city suffering from rising home prices. Although it may seem like you’ve entered the market at a less than ideal time, there is good news! Despite home prices rising because of low inventory, homes still remain affordable because of historically low interest rates.
What Should Home Buyers Expect This Spring?
Buyers should be prepared for a limited selection in months to come, however with low interest rates, and the selection they do have those homes should still be more affordable. Know that while rents continue to rise, interest rates have remained the same if not lower!
Keep your head up future home buyer! Pack your patience while home shopping and know there is still a positive outlook on this less than ideal housing market.
Contact one of the Mortgage Advisors at Absolute Mortgage if you have any questions or would like to get pre-approved!
Inman.com Why is Housing Inventory so Low?
Seattletimes.com Seattle metro-area home prices up nearly 10 percent in a year