The housing market is thriving once again, but in a healthy way. This is exciting news for both buyers and sellers looking to make a move this year.
While 2013 showed some of the fastest growth in housing prices since early 2006, with average year-over-year increases of 13 percent according to the S&P/Case-Schiller 20-city composite home price index, experts predict housing prices will increase at a more reasonable and sustainable rate of 5-6 percent in 2014.
Incremental increases in average home prices may seem like a one-sided victory, benefiting sellers more than buyers, but it actually produces opportunities for all. Slow, level housing price increases provide the best economic landscape for buyers and sellers alike.
One of the driving factors behind 2013’s substantial price increases was scarcity, too few homes for sale. Many homeowners were still underwater, owing more on their mortgages than their homes were worth. So, while individuals felt economically secure enough to buy new homes, many homeowners were unwilling to place their homes on the market until prices improved.
Another contributing component is the slow return of new home construction. Builders filed for over one million new construction permits in 2013, the most since 2008, but many were for multi-dweller units, leaving single family home construction fairly flat.
Reluctant home owners and an even new home construction market meant that the relatively few homes that were for sale could demand higher prices. In some areas, that led to huge jumps in 2013. In Las Vegas, for example, average home prices increased 27 percent year-over-year, the largest increase of the 20 cities used in the S&P/Case-Schiller index.
Now that prices have improved, however, more homeowners are willing to sell, resulting in equilibrium of supply and demand. With sufficient inventory available, prices are leveling out.
If you’re considering selling, now is be the best time in years. Improving sales and fewer foreclosures should translate to your home selling fast if positioned correctly. The pricing increase may also provide equity you can rollover into a down payment on a new home.
As a buyer, now is definitely the time to make a move. Historically low mortgage rates and fewer cash-only investors snapping up properties make the current housing market very attractive.
Check out our post on the challenges and opportunities of buying a home in 2014.