Buyers Market Expected for Housing this Spring
As real estate season kicks off this spring, many home sellers are eager to unload their houses, but unfortunately, the U.S. housing market is predicted to remain depressed through the spring. There was a sharp drop in sales of previously owned homes in February, which could result in large discounts this spring. However, this could be the bottom of the trough for housing, and many expect the market to begin a solid recovery soon.
According to the National Association of Realtors, we’ve just seen the median price for existing homes sold drop 9.6 percent to $156,100, the lowest median since February 2002. With interest rates expected to rise before next spring’s home sale season, this spring could very well be the best time to buy a home, as prices are falling, but before interest rates rise.
"Few think mortgage rates are going lower," said Moody's Analytics chief economist Mark Zandi. "It's more likely they will be 6% than 4% next spring. This lights a fire under buyers."
Analysts are hopeful that this set of conditions will motivate buyers who have been sitting on the fence, and kick-start the housing market.
"The job market is getting better and that will make people feel more confident about their income-earning prospects," said David Berson of the PMI Group. "You need that confidence to buy a house. Household formations are also very important. ... Kids may have moved back in with their parents, or two people may have moved in together, because of job concerns. Now they can move into their own place."
While statistics are not yet available, experts predict that the data will demonstrate that the market for new homes is just as depressed as the market for existing dwellings. Across the country, home builders have been raising discounts on residences, and increasing commissions to broker. Alex Barron, a home-builder analyst with the Housing Research Center, says that this indicates that things are not going well.
"The level of desperation in the builders is just going to increase substantially in the next two months, which is the heart of the spring selling season,” said Barron.
The need to make fast deals, bad weather, and lowball appraisals have all been blamed for the February slump. A third of all transactions were all-cash sales in February, with investors dealing with only 19 percent of sales. This figure fell from 23 percent in January.
"After three years of the housing downturn, people are becoming much more realistic in terms of valuing their homes," said Lawrence Yun, the National Association of Realtors' chief economist.