A lot of people are clamoring about the improving housing market. Many wonder if we have really turned the corner and how much better it will get. Also, what impact will it make?
Chief economist, Anthony Chan, for private wealth management at J.P. Morgan in New York, as reported by Business Observer, said, "Things are getting better because housing is getting better."
The rising housing prices ignite a sense of confidence in the economy and lead to greater spending. What this means is that there is great opportunity for sellers.
One group in particular is the "boomerang buyers". That's the term being used for those homeowners who lost their home to a short sale or foreclosure in the recent past and now are shopping for another home to buy.
However, the guidelines for these buyers are strict. It's likely they have to have at least 20 percent deposit and wait at least two years after the foreclosure before they can buy again. It's unlikely that high-risk loans will be available to this group.
Sellers are noting the improving housing market and anticipating an even better year. Part of that is not only due to rising home prices but also less inventory. In December, 1.82 million homes were listed for sale according to the National Association of Realtors, down 22 percent from a year ago. The supply hasn't been this low since 2005.
This may seem like all good news, at least for sellers, but if home prices rise due to a
shortage of inventory and incomes don't keep pace, there's trouble and a potential bubble. Ideal housing market circumstances are when housing prices rise due to increasing income and employment.
"The supply limitation appears to be the main factor holding back contract signings in the past month," the NAR's chief economist, Lawrence Yun, said in a news release. "Buyer interest remains solid, as evidenced by a separate Realtor survey, which shows that buyer foot traffic is easily outpacing seller traffic."
The shortage of homes doesn't necessarily apply to all homes. The lack of inventory is significant in the group of homes, mainly in the west, that cost less than $100,000.
"We expect a seasonal rise of inventory in the spring to help, but a seller's market may be developing. Much of the West is already a seller's market for homes priced under a million dollars, but conditions are much more balanced in the Northeast," said Yun.
Despite the current lack of supply, Yun points out that contract activity has continued to increase for 20 consecutive months on a year-over-year basis. Yun expects to see existing home prices increase another 9 percent as they did in 2012.