Positive Housing Market Trends
Photo: © Graça Victoria - Dreamstime
Mortgage rates have hit record lows, which means housing affordability is at an all-time high. But are home buyers taking advantage of this opportunity? The latest real estate news suggests that potential home buyers are becoming actual home owners.
According to the National Association of Realtors (NAR), pending home sales for November increased 7.3 percent to the highest level in 19 months. The Pending Home Sales Index assesses the health of the real estate market by evaluating housing contract activity. An index of 100 is considered healthy; the November index sits at 100.1, up from the previous year's November index of 94.5. The index hasn't been this high since April 2010, when the then-upcoming deadline for the home buyer tax credit created an increased demand in the housing market. In today's market, there might not be a tax credit incentivizing buyers, but there are record-low mortgage rates. Potential buyers who have been waiting on the sidelines for the market to improve are finally signing contracts to take advantage of a 30-year fixed-rate mortgage below 4 percent.
The Supply of Homes on the Market Decreased
The total housing inventory for November fell 5.8 percent. By the end of the month, 2.58 million existing homes were available for sale. Of those homes, 29 percent were foreclosures and short sales, down from 33 percent a year ago; while still high, this is movement in the right direction.
Construction Spending Increased
The improving real estate market is also boosting the construction trade. According to the U.S. Census Bureau of the Department of Commerce, construction spending rose 1.2 percent in November, due in large part to a 2 percent increase in residential construction spending.
Residential construction spending is up, foreclosures are down and more real estate contracts are being signed. Unfortunately, not all of those contracts will make it to closing. According to NAR, around 33 percent of its members reported contract failures, on track with October numbers but far above the reported 9 percent of contract failures a year ago. The possible reasons for these contract failures are varied; declined mortgage applications, failed home inspections, and low appraisals can all sink a deal. NAR economists believe that the number of existing home contracts that make it to closing should increase in the months ahead.
Are You Ready to Buy?
If you're looking to purchase a home, take every precaution to ensure your deal isn't one of the 33 percent. Secure your financing before placing an offer on a home, and seek a second appraisal if the first is too low. If your first deal falls through, don't be afraid to make an offer on another home. Based on the latest real estate news, it's a good time to buy.
