After a banner year in 2013 the 2014 real estate campaign limped out to a slow start. Media jumped on the chance to remind consumers that housing sales were down in year over year sales and activity was noticeably different than the previous year for those of us involved in the business.
However, while there is a definite purpose to comparing year over year sales, the numbers themselves hold little meaning unless they are placed into context. In comparing 2013 to 2014 regarding the housing market it is true that most months showed a decrease in sales from year to year. Yet when we look at 2014 compared to the last 10 years we can see that single family home sales are on pace to be greater than any year since 2006, median price has matched it’s historical peak at $218,000, and interest rates remain low.
So what does this tell us heading into 2015?While general predictions show a fairly strong future, it will be important to keep an eye on these three trends as 2014 winds down and the next sales cycle begins.
A year ago many reports were mentioning that we would be near 5% by now yet just a few weeks ago we saw another dramatic drop to as low as 3.625% in some places. While it’s unclear just when and how rates will begin the rise to healthier levels, it should be noted that we will not be here for long. As rates rise it’s important to understand that historically speaking we are still at low levels.
If you are considering a move in the next year it will benefit you to keep an eye on rate trends as a 1% rise in interest rates is roughly a 10% decrease in purchase power. In other words, if you can afford a $300,000 home at today’s 4% rate you may only qualify for $270,000 once rates hit 5%.
With little competition, an improved market, and low interest rates we have seen prices increase at a fairly substantial clip over the last 24 months. The long term effect of changing interest rates remains to be seen, but our area has not historically fallen victim to the same price swings as other regions of the country. Expect fairly stable appreciation for the near future.
As seen through most of the last 2 years, our inventory of available homes remains lean. While this remains good news for sellers who face less competition, this can create challenges for buyers looking for their next home. As the number of distressed properties has plummeted we still have not reached the level of new construction seen nearly a decade ago. The recovery of new construction will play a major role on inventory levels moving forward. It’s also worthwhile to note that months of inventory for condos are now lower than single family homes across the county as evidence of a strong recovery of the local condo market.
Remember, as you hear about trends in the market that your unique market may be affected differently than the greater area. For more ind depth information regarding these general trends read the latest edition of the Stark Real Estate Market Source Newsletter. If you’re curious about the specific trends happening in your neighborhood contact Jeff & Michelle at any time.