As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer ProcessTM.
If you’ve recently started to search for a home, you’ve probably noticed that prices seem to keep going up at the moment.
According to Quicken Loans data, values are up 3.30% on the year. Other estimates place this even higher, with the FHFA House Price Index showing asking prices up 5.7% nationwide. Still another index from S&P and Case-Shiller shows that prices for homes are up 5.9%.
So what’s the deal with rising home prices? More importantly, if you know they’re going up, what does this mean for you as a home buyer? Let’s explore these questions.
Inventory Is Low
A major reason that prices are as high as they are is that housing inventory is pretty low at the moment. In conjunction with the Department of Housing and Urban Development (HUD), the U.S. Census Bureau releases monthly data on housing starts. This measures the number of new homes being started by builders across the country.
In March 2017, the number of new housing units being built across the country was 1.215 million on a seasonally ingested annualized basis. Although this number has been increasing steadily since the economy started to come out of the last recession in late 2009, numbers are still well below historical peaks. It’s common for home builders to construct upwards of 2 million units in a good year.
There’s Lots of Competition
Low inventory is OK in periods of weak demand. Unfortunately for prospective buyers, competition appears to be stiff even prior to peak home buying months in the spring and summer.
In addition to housing starts data, the Census Bureau and HUD also put out data on new home sales. Not only do you get an idea of how many sales are expected over the course of the year, but how much inventory is available assuming sales continue on their current pace.
Based on this data, we see the supply of new homes in the market is 5.4 months. If the market is in balance, there would typically be about six months of supply available.
Things are even more drastic when you take the supply temperature for existing home sales. According to data kept by the National Association of Realtors, the supply of existing homes in the market sits at 3.8 months. If you’re looking for a home that isn’t brand-new, you’re going to have a lot of other buyers to compete with right now.
Admittedly, it’s a little harder to find the house you want at the moment, but there are a couple of things you can do to make sure you give yourself the best chance of winning in the competitive markets.
Prioritize Your Wants and Needs
When you’re looking at houses in a competitive market, decreased inventory may mean you won’t find a house that has absolutely everything you want. If you do, it may or may not be in your price range. Once you have the house, it’s your own. You can make additions and updates that meld it to your taste.
If you have your preapproval ahead of time, this could be a real advantage for you because the seller knows you have the funds to back up your offer. You’ll also have a budget when you get ready to shop for your house. Best of all, the seller will know your process should move faster than someone who has to start from square one with a mortgage company.
Getting through the process faster also helps you make your move faster if prices in your area continue to go up.
You can get a preapproval online through Rocket Mortgage® by Quicken Loans®. You can pull your credit and share bank account and income information with us in order to get a budget online in a matter of minutes when it’s time to start shopping for your home. If you prefer to get started over the phone, you can call (800) 785-4788. If you still have questions, we’ll be happy to answer them in the comments.
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.