SantaFeToday.com Santa Fe’s Hometown News
By Varela Real Estate
The Spring 2018 real estate market is a good news/bad news story. A recently released report from Arch Mortgage Insurance points to affordability slipping, inventory declining while interest rates and housing prices rise. Key findings from Arch Mortgage Insurance’s Housing and Mortgage Market Review Spring 2018 Report predict this year to be one of the worst for housing affordability with a current decline of 5%.In fact, Dr. Ralph De Franco, author of the report and Global Chief Economist at Arch Mortgage Insurance provides these insights: “The other factor is the United States is underbuilt. There are 1-2 million fewer units out there than there should be based on population growth.”
According to the report, the size of the monthly mortgage payment needed to buy a home rose nearly 5% over the past three months. The picture gets bleaker towards year end with affordability possibly decreasing an additional 10%-15%.
Affordability and interest rates will be taking a major hit at the end of 2018 as home prices continue to increase. In many urban areas, buyers are pushing prices up with multiple offers and bidding wars. These directly impact the affordability factor.
The result is not only do Millennials have fewer housing options, baby boomers looking to downsize also have limited options. In some markets baby boomers are competing with Millennials for the same properties.
This Spring home buying season is one of the most competitive we’ve seen in years, as the demand for homes continues to exceed supply in most regions of the country. Experts are watched the pace of single-family home construction and mortgage applications to better predict how tight the housing market could get. A solid indicator, Days on Market (DOM) the average of 54 metro areas for homes sold in March 2018 was 60, down four days from March 2017. Hot markets reported considerably fewer DOM with San Francisco garnering the fewest at 20 for March 2018. Seattle hit 28 while Denver came in at 30 DOM.
2018 will be the first year we will see limited inventory, rising home prices, and an increasing interest rate environment which directly impacts the long-term costs for buyers.
It is a good news bad news story. Since there is not enough inventory for buyers, sellers are getting the better end of the game. The good news is with home prices continuing to rise it remains a strong economy. Industry experts don’t see it getting better for buyers anytime soon. However, it is not recommended to wait – it’s more important than ever for buyers to have a clear strategy of what and where they want to buy, how they’ll finance it and what their requirements are, so they can focus on placing competitive offers when they find a home they want. The consensus is if you are in the market for a home and can make it happen, now is the time jump in. Conversly, if you are in the market to sell your home, now can be the best opportunity you will have to liquidate your property for the best price.
