Purchasing a home today requires a new skill set that includes a balancing act able to accommodate limited inventory, rising interest rates and a stronger economy.
With the new economic momentum driving the American economy, first-time homebuyers are enjoying a renewed sense of hope for owning their own home as an achievable goal.
In some cases, the ability to finance a mortgage has improved, and the number and the selection of homes available has considerably contracted over the last 18 months. In certain areas of New Jersey, there is approximately three and a half months of supply; this compares to just 12 months ago when they had six months of supply, and 24 months ago when they had nearly 10 months of supply.
Even though spring is a notoriously strong time for buying a home, the National Association of Realtors is expecting somewhat of a less-than-torrid buying and selling season.
In the wings is also a new wrinkle to the business of buying a home, and that is lack of inventory for sellers to find a house that they can move to. Sellers are basically stuck with the same constriction of inventory that buyers are battling with.
Even if a seller is willing to sell their home, finding an affordable home in the areas that they’re looking to move to is problematic. If there isn’t a place for sellers to move to, the transaction gets stalled. One Realtor that I spoke to talked about the issue of the contingency logjam: where sellers are presenting additional stipulations that complicate and even hijack a transaction. The more contingencies that are attached to a transaction, the less likely it is to be consummated.
According to the recent survey the sentiment of home sellers says that now it’s a good time to sell – jumping from 71% in the fourth quarter of 2017 to 74% in the first quarter of 2018.
For homeowners the improvement in the market has provided them an abundance of equity in their homes, which incentivizes them to recognize this high return. According to the National Association of Realtors, home prices have grown 48% since 2011 and they are up 5.9% through the first two months of this year. Those are heady numbers to ignore if you’re a seller and intimidating numbers to consider if you are a buyer.
Oftentimes demand is fueled by the anticipation of a stronger economy and thus far in 2018 economic optimism is around 60%, which is just slightly lower than it was in the first quarter from last year.