Good news for sellers, but buyers face a daunting reality
Today’s Case-Shiller results showed home prices keep rising at their fastest pace in almost three years and according to experts, that’s not going to stop anytime soon.
The index, put out by CoreLogic and S&P Dow Jones Indices, increased 5.8% annually in March, a pace which experts say is good news for sellers, but not so great for home buyers.
“Homebuyer demand is sky-high, inventory levels are near rock-bottom and home prices keep rising,” Zillow Chief Economist Svenja Gudell said. “These trends have been driving the market for years now, and all recent data, including today’s, points to these dynamics continuing for a while to come.”
“We’re in the thick of home shopping season now, and it’s undeniably a great time to be a home seller: Listings are on and then off the market seemingly in a flash, and multiple offers are the norm in many markets across the country,” Gudell said. “Buyers, though, face a different and more daunting reality – competition is fierce, budgets may be strained and nerves will be frayed. Prepared, patient buyers that have been pre-qualified and have done their research will find the most success.”
Gudell explained that sooner or later, these conditions will change as builders bring more inventory on line, more home sellers come out of the woodwork and home price appreciation cools in the face of slowly rising mortgage interest rates. However, for now and the foreseeable future, she is not exactly holding her breath.
Black Knight also released its Home Price Index Report, showing home prices rose to a median $272,000 in March. This represents a new peak in home prices, and a rise of 2.3% from the start of the year.
Another expert explained this increase in home price growth shows the strength of the demand for housing, despite rising interest rates.
“The continued home price growth, driven by inventory that can’t keep up with the high demand, is further proof of a strong appetite for home buying,” said Bill Banfield, Quicken Loans executive vice president of capital markets. “This should quell the fears of those who voiced concerns over the effects of rising interest rates on housing.”
And another expert agreed home prices will continue to growth, picking up speed in the second quarter. However, Ed Stansfield, Capital Economics chief property economist, predicted home price increases will fall off during the second half of the year.
“On the face of it, a renewed acceleration in the monthly pace of house price gains seems unlikely,” Stansfield wrote in his data response. “After all, while the labour market looks healthy, data on mortgage applications, as well as sales of both new and existing homes, have been disappointing of late.”
“In each case, cutting through the month-to-month volatility, these activity measures have, at best, tracked sideways since the closing stages of last year,” he explained.