With mortgage rates still near generational lows, national home prices down more than 20% from the peak and the government providing tax incentives for homebuyers, it seems like a great time to buy a house to many homeowners. The number of multiple offers that buyers have been encountering in every price range in the Westside/South Bay markets would lead one to think they may have missed the boat to buy last year. . .but did they?
According to Zillow chief economist Stan Humphries, those people who can afford to wait to buy a house are probably better off. Based on the most recent data which this blog has been forecasting for months, Humphries notes the official inventory numbers “don’t capture all the foreclosures that are out there” or the so-called shadow inventory of homes waiting to come on the market.
A recent Zillow.com survey shows 8% of homeowners, or about 10 million Americans, are very likely to sell as conditions improve.
Humphries doesn’t expect anywhere near 10 million more homes to come on the market in the near term. But this “pent-up supply” combined with foreclosures already in the pipeline and those yet to come because of negative equity and job losses means it will take three-to-five years “before we see more normal appreciation rates return to the market,” the economist predicts.
“If you’ve got good credit and can put a down payment down…and you’re planning to stay in the house for an extended period of time [like] seven-to-10 years, then now could be an attractive time to buy”
A few other things to consider: The end of the Federal Reserve’s subsidy of the mortgage market interest rates in a few weeks which could push rates up to 5.5% by mid-summer which is right when Foreclosure sales and real estate owned (REO) properties are on track to spike.
Furthermore, real estate prices are not determined simply by the availability of properties listed for sale. The home-buying population’s purchasing power, limited to 31% of a prospective homebuyer’s income, is directly related employment. In California, 2.5 to 3 million people remain jobless.
Given the facts and trends before us, time is still on the buyer’s side.