The Housing Market: Down or Up From Here?

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Who better to hear it from than the appraisers, appraising homes for purchases and refinances in today’s market? They are on the “front line” and able to see the trends in the market as they develop over time. Summarizing the state of the market, the vast majority of appraisals we are viewing now, show the housing markets to be “stable.” What does “stable” mean? Basically, it is implying that there are an equal amount of buyers and sellers, so home prices for the most part are not moving higher, or lower. They are in an apparent holding pattern for now.   

If you recall back in 2006 and through 2010, we had a meltdown in housing. It started with subprime loans melting down, due to their horrendous underwriting policies that basically allowed anyone who could fog a mirror to obtain hundreds of thousands in real estate financing to buy and refinance houses with little or no money down or in equity in a home. That proved to be a recipe for disaster and we all saw the eventual outcome of that. Devastation in the housing market with home prices dropping 25-65%, depending where the homes were located. It took a half of a decade to stop that price spiral and then the market started stabilizing, then recovering to the point where home prices are basically at or near the levels they hit before the financial meltdown.

Does this mean we have another bubble forming in housing? That is not likely, as lenders have been much more responsible in their lending. Borrowers now have to have solid income, strong liquidity, and good credit. The debt ratios that lenders allow seem to be reasonable and manageable for the consumer. The Affordability Index is still at a manageable level in most areas. Housing creation is not meeting demand, and that does not look like it will change anytime soon. Throw in the fact that rents keep rising. and will probably continue to do so, and homeownership still looks like a great bet for those consumers who can partake. In many cases, the after tax cost of homeownership, is much more attractive than renting as the alternative.

Does it look like rates will be rising soon? The key factor for the direction of mortgage rates is inflation and our core inflation numbers are at our below the Fed Target range for “healthy” inflation, which they target around 2.0% annually. Hence, mortgage rates are staying in check, and historically still very low.

Summing it up, housing prices remain stable. We are seeing homes sell quickly when priced according to the market conditions in their neighborhoods. We also see homes sit on the market when unrealistic sellers “over-list” their homes, and many of those listings go stale. Real estate ownership remains very attractive as do mortgage rates.