GREAT article on Bloomberg today that we absolutely have to share with our readers.
The third straight year of average declining U.S. home prices is creating a boost in home sales. Plus, mortgage rates are currently back down near historic low levels and home buyers are rushing to take advantage of this double whammy (lowest mortgage rates in a generation + lowest home prices in years). This is all happening despite home prices that continue to decline.
I know this discouraging fact all too well. The home I bought in May 2009 has supposedly already lost (on least on paper) more than 10% of its value since I purchased it. And I paid 30% less than the previous owners paid just three years earlier (despite them doing several very nice updates during that time).
Regardless, new (and used) home buyers are taking advantage of great prices and great mortgage rates. Very smart of them, if you ask me.
Here’s a quick summary of the main points of the article on Bloomberg:
- Lower home prices driving sales
- Fear that mortgage rates will rise helping to motivate folks
- Median prices at the lowest level since 2002
- Prices are 31% lower than the 2006 peak
- Job market gaining “some” traction
- Home price bottom…is near
Here’s a little bit directly from the article:
“The third decline in U.S. home prices in three years is driving a pickup in sales as bargain hunters rush to buy before mortgage rates rise, even as values may slump further.
Mounting foreclosures pushed the median price for a U.S. existing home to $158,800 in January, the lowest level since 2002, according to the National Association of Realtors. At the same time, sales climbed 22 percent from October, the biggest three-month gain since the end of a homebuyer tax credit. The rally began as mortgage rates started to rise from record lows in November and the economic expansion picked up speed.
“The job market is beginning to gain traction, consumer confidence is improving, and even though mortgage rates have increased, they’re near historic lows,” said Mark Zandi, chief economist of Moody’s Analytics Inc. in West Chester, Pennsylvania. “Prices may go down a bit more, but we’re still seeing a pop in sales.”
Fannie Mae, the largest mortgage-finance company, forecasts home prices will fall further this year and sales will jump. Discounts on foreclosed properties are eroding the values of other homes, making houses more affordable and opening the market to more people. A sustained increase in sales may signal a bottom in values as prices fall to levels buyers can’t resist.”
So home buyers, get out there and take advantage of this very unique situation. If you don’t, you will be kicking yourself in a few years once home prices and mortgage rates have risen, and the incredible opportunity for home buyers today is nothing but a distant memory.