Summer’s Real Estate Trends & Predictions for Fall/Winter 2013: Inventory, Rates & Prices

posted on August 5th, 2013 | filed under: Uncategorized

As we cross the halfway mark through 2013, it’s clear that there are still a lot of moving variables impacting the real estate market.  The biggest stories of the year have been about the disappearing Inventory, historically low Interest Rates and rapidly appreciating Home Prices.   So, what do the market trends we’ve seen so far this Summer mean for the rest of the year?

Summer Trends:

  • Inventory reached dramatic lows across the country.  California (and San Diego) were especially hit hard.  After years of having a surplus of homes on the market to choose from, buyers suddenly found themselves in a wildly competitive bid to get their offers accepted.  Compounding the issue further, investors and wall street were sweeping in and paying cash for the most affordable homes.  With builders still 18 months away from offering a substantial amount of new homes for purchase, realtors and lenders have been working harder than ever to help their clients find a home.
  • Interest Rates were at historic lows for most of the year, but have begun to creep up over the past month.  According to the Mortgage Bankers Association, between the beginning of May and the end of June, the average interest rate for a 30-year fixed-rate mortgage surged from 3.59 percent to 4.68 percent.  Even the slightest rise in rates can have a huge impact on the cost of a home over the life of a loan, so this type of increase can greatly reduce the buyer power of current shoppers.  For example, just a 1% increase in interest rates on a $500,000 mortgage will cost the buyer an additional $100,000.  For good reason, the rising rates have a lot of people feeling the pressure to buy and buy quickly.

  • Home Prices appreciated nearly 12% in San Diego since Summer of 2012.  For the many homeowners who had bought at the peak of the market and were upside down on their home loans, this is great news.  For the buyers who were hoping to get into the market while prices were low, this was a shock.  Everyone had been waiting so anxiously for a sign the market had bottomed out that the sudden rise in prices was a jolt.  Much like with the recent rise in interest rates, this has caused a lot of stress among buyers who fear that homes are becoming less and less affordable with every passing month.

Fall & Winter 2013 Predictions:

  • Inventory Thankfully, there does seem to be an end in sight to the challenges with inventory.  The quickest relief we’ll feel on inventory will come from sellers who were previously underwater on their home loan and are just now able to put their home on the market because of the price appreciation. We’re also seeing builders apply for permits at the fastest rates since 2008 and U.S. new-home construction has risen 28.6 percent since May 2012.  Local professionals expect that over the next two years we will see a lot of new developments through out San Diego. Unfortunately, that’s a long wait for many people! For those hoping to buy while interest rates and home prices are still low, you need a strong team of pro-active professionals.  A good lender will get you pre-approved for a home loan and ready to efficiently close a purchase escrow so that sellers recognize you as a serious buyer.  Samuel Scott Mortgage Advisors follow a 5-point plan to help get their clients’ offers accepted.  They make direct calls to sellers agent on behalf of borrowers, put together videos about their clients and go above and beyond to give their clients a competitive advantage.
  • Interest Rates Right now the headlines are screaming about increase rise of interest and a new survey conducted by Fannie Mae showed consumers believe that mortgage rates will continue to increase over the next year.  What we expect is to see a fluctuation in interest rates over the Summer, but they will remain relatively steady.  Going into Fall typically interests rates do rise, but in the Winter they seasonally decline.  The year will probably end relatively close to where we are now, which is an overall historic low. Remember that interest rates are not just about national averages, they are about your own micro-economic situation.  Their are several factors that have a huge impact on what mortgage rates you qualify, perhaps even a larger impact than what the markets dictate.  It’s important to speak to an expert Mortgage Advisor very early on in your home search process.  They can help you lock in a good rate right away, or teach you how you can make financial adjustments that will improve your standing and help you qualify for a stronger rate in the future.
  • Home Prices For the most part, everyone is pretty happy that home prices are on the rise and consumer confidence looks good.  But combined with the low inventory and rising interest rates, the higher home prices have slowed the surge in home purchases.  Most professionals believe prices will continue to rise, but with the smaller demand it will be at a slower pace.  The trends suggest that we will see more balance among buyers and sellers as the year continues and that we are not likely to be entering another housing bubble crisis. Real estate is hyper local – especially when it come to home prices.  While some areas in San Diego are showing incredible recovery, other cities have grown at a much slower pace.  Rather than looking at the overall trends, buyers should be narrowing down the data to just the communities they are interested in.

Written by Samuel Scott Financial Group

posted by Jeff DeChamplain

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Jeff DeChamplain