Are you finally off the fence and doing a little home shopping? As the market heats up and sellers regain control, here are a couple of trends to consider.
Low mortgage rates
The 30-year fixed mortgage rate on Zillow Mortgage Marketplace is currently hovering near historic lows, at 3.78 percent. And while rates have crept up this past week, they’re not going to skyrocket suddenly, says Erin Lantz, director of mortgages at Zillow. “Even if the Federal Reserve starts to scale back its stimulus program, the Fed will still help keep rates low for the remainder of the year in order to accelerate the housing market recovery. As the Fed withdraws support and the economy recovers, we expect rates will rise gradually over the next 18 months.”
As of February, slightly less than 2 million homes were for sale nationwide. This represents a supply of less than five months (six months’ supply is considered “normal”). During the same period last year, the supply was 6.4 months. In a dozen markets, there is less than a three-month supply of homes on the market! Granted, rising home prices should lead to more inventory (and ultimately more sales because it encourages new construction and encourages homeowners to sell), but one key question is whether prices will rise enough so that for-sale inventory will hit bottom and start expanding again.
As demand from home buyers grows faster than the supply of homes for sale, many buyers are taking less conventional routes to find their dream home: They’re knocking on the doors of homes they like, writing handwritten notes, and tracking down the owners in hopes they may be willing to sell even though their home is not technically on the market. Zillow’s Make Me Move® section, where homeowners list their properties with a “dream” price, is seeing a flurry of activity: There are now 148,000 listings, and contacts to owners are up 132 percent over last year.
As many of the nation’s markets heat up, bidding wars are quickly becoming the norm — especially in places such as California (San Francisco, Sacramento and cities in Southern California), Boston, Washington, Seattle and New York. This poses a challenge, in particular, for first-time buyers seeking entry-level properties in Las Vegas, Tampa and other markets where investor demand is particularly strong. Who do you think wins the bidding competition — investors with all-cash offers or buyers who need to obtain financing and have the home appraised at their offered price?