Report: Healthy Housing Market this Spring Home Buying Season
Spring is in the air – and so are “For Sale” signs. Traditionally, Spring and Summer are the busiest seasons for home buyers and sellers, thawing out after the slower winter months. Housing professionals anticipate this Spring to be especially busy, with improved affordability for home buyers. While 2018 ended with higher mortgage rates and home prices, the early months of 2019 have brought lower mortgage rates plus a slowdown in home price appreciation. Recent data shows consumer house-buying power has increased 2.3% from December 2018 to January 2019, and the trend is expected to continue.
First American Financial Corporation (NYSE: FAF) Chief Economist Mark Fleming reported, “While 2018 was largely characterized by declining affordability, ending the year with a five percent yearly decline in house-buying power, this trend reversed sharply in early 2019. Moderating home prices, in conjunction with gains in household income and declining mortgage rates, boosted affordability for potential home buyers.
Some significant takeaways from First American Financial’s January 2019 Real House Price Index report:
- Real house prices decreased 1.9 percent between December 2018 and January 2019.
- Real house prices increased 7.0 percent year over year.
- Real house prices are 14.0 percent less expensive than in January 2000.
- While unadjusted house prices are now 1.6 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 38.8 percent below their 2006 housing boom peak.
Housing activity is strongly influenced by the labor market and income growth. Today, the unemployment rate rests at a historic low and after years of stagnant wage growth incomes have started to increase. The average household income has increased 3.6% from January 2018 to January 2019, and a significant 55% since January 2000.
Some economists expected Tax Cuts and Jobs Act would slow down some higher-end housing activity because of new limits to the state and local tax (SALT) deductions and mortgage interest deductions. As predicted, in states with higher priced homes and property taxes, where homeowners were more likely to use SALT and mortgage interest deductions, home price appreciation has slowed. Southeastern states, especially Florida and Texas, have finally seen their housing markets recover, following substantial damage from the 2017 hurricane season.
Overall the outlook is rosy for 2019. Based on early 2019 data, Nationwide Senior Vice President and Chief Economist, David Berson, said in a statement, “with slower house price increases and recent declines in mortgage rates, coupled with a still solid job market and rising wages, the spring homebuying season looks as pretty positive.”
If you are looking to buy a home this Spring, it’s important that you get preapproved for mortgage financing before making an offer. Mortgage preapproval shows the seller that you can ensure a faster transaction. If you’d like to talk about getting preapproved, please let me know. Our quality preapprovals mean we start the underwriting process as soon as we take your application. That way, once your offer is accepted, all we need is the appraisal.
Sources: First American Financial Corporation, National Mortgage Professional Magazine