August 16, 2012
Housing affordability dipped slightly during the second quarter according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), released today. Additionally, this past week, Freddie Mac released their U.S. Economic and Housing Market Outlook for the month of August, 2012 which revealed that their Price Index increased 4.8% from March to June, 2012 which was the largest quarterly increase in eight years.
So is this the end of the bargains for buyers?
With so many economic and political variables that impact housing prices and interest rates, it is difficult to be sure. The decline in housing affordability, however, is overall a positive development as it is evidence of a modest pick-up in consumer confidence, as they shed the reluctance to buy/sell homes. Perhaps driving this pick up is the historically low interest rates, and the prospect that rates may inch higher once the Fed stops their measures which are artificially keeping interest rates near historic lows. The Fed has committed to keeping interests rates low through 2013, and they have purchased $2.3 trillion in mortgage bonds in order to stimulate the economy and drive down unemployment, which hasnt dropped below 8% since the Fed began this program. The fear of homebuyers (and sellers), however, is what happens to interest rates when the FED stops flooding the economy of with new money. Most think that inflation and rising mortgage rates are inevitable the question is when.
What does this mean?
If you are in the market for home, it is still a great time to buy. The bargains that took place over the last couple of years, however, are becoming fewer, as the percentage of short sales and foreclosures that make up sales have decreased significantly. Interest rates remain at historic lows, as does home affordability.
Are you seeing bargain homes on the market in your neighborhood?