Posted On February 20, 2018
Despite what the groundhog said, some real estate professionals are seeing an early spring in the housing sector. Gradual rate hikes and steady home price appreciation are pushing some home buyers to start shopping early. In heated housing markets, like Denver, Colorado, a moderately priced home can see as many as 100 tours in a single weekend.
In January, Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased 3.7 points to a level of 89.5, an all-time survey high. Five of the six index components improved, and the sixth was unchanged. Though most Americans surveyed expect mortgage rates and home prices to continue to rise, a larger share felt that now is a good time to buy and that now is a good time to sell. Americans are also increasingly confident in the job market and job security. With unemployment near a 45-year low and jobless claims maintaining record low streaks, the job market is close to full employment, wages are starting to rise, and workers who choose to change jobs are confident they will find comparable employment.
Doug Duncan, senior vice president and chief economist at Fannie Mae, explained that while the outlook is positive, it is still too early to make predictions. He said, “At the start of 2018, it is still too early to determine the overall effect of the new tax legislation on housing, and we will need to see whether positive impacts on both housing demand and supply materialize in the coming months.”
Rising mortgage rates and home price appreciation may influence the sentiment that it is a good time to sell, but most sellers will also have to be buyers too. Some would-be sellers are not calling it a good time to sell, out of concern that they will not be able to find a similarly priced new home to buy. With additional rate hikes expected in 2018, the housing market may become even more competitive, with buyers looking to lock historically low interest rates before further rate increases. Some home buyers interviewed by CNBC report that budget limitations are a more pressing concern than rising interest rates. As more young buyers compete over starter homes and lower-priced homes, time on the market gets shorter, and multiple offers on a single home grow common.
Denver Redfin agent Martin Mata said, “There is simply too much demand right now. […] In the short term, I strongly believe that is going to cause a lot more buy-side demand as people try to get into a home before interest rates get to a point where they can no longer afford a home they would like.”