The Outlook for 2016
As I mentioned in the video, 2016 looks to be another strong year in real estate. I believe we will continue to see price appreciation especially in the spring as buyers will be out in higher numbers and therefore competition will be strong. Interest rates will be a hot topic. The Fed has begun raising the rates and while that does not directly correlate to a rise in mortgage rates it will be interesting to watch what impact it and the stock market has on long term bonds which is what typically guides interest rates on home loans. For now the rates are stable. We even saw a slight drop in mortgage rates in December
We are seeing plenty of showings on our listings. However, buyers seem to be taking longer to make a decision. Many buyers have a home to sell and want to lock up the home to which they’ll be moving before theirs goes on the market so they are shopping earlier in the process.
Prices appreciation has tapered, in most ranges. The sub $350K to $400K is still very, very strong. Inventory is typically close to what it was at the beginning of 2015.
Houses are taking a bit longer to sell yet there is a high occurrence of backup offers being put on under contract homes. Inventory is at or below where it was this time last year, however the selection of premium properties in each price range is still low. It’s not unusual to have multiple offers but most are just below or right at asking. The number of offers that exceed asking price has dropped. Over the last few months’ buyers have become a bit hesitant to do that. Most that I talk with feel the market is healthy and will remain that way for the long term but don’t feel the need to “get the house no matter what”. They believe the right house at the right price will become available in the time frame they need. They are also feeling more emboldened this winter so they are more aggressive in their offers.
The lending environment has improved over the last year or so. There was a lot of concern as to how the new Federal requirements relating to home loans would impact the market. From my perspective the changes have improved the market. Yes, it does take a bit longer to close a loan (the typical time from contract to closing is now around 40 to 45 days versus the 30 days we used to see). The real estate agents and lenders who have planned well and are cooperatively participating in counseling the buyers as to the deadlines in the offer are seeing transactions go smoothly.
The biggest challenge right now is obtaining timely appraisals. Appraisers are in short supply and the volume of work they need to complete is staggering. The timeline for obtaining appraisals has increased significantly.
Due to the volume of contingent offers (offers where the buyer still needs to sell their current home to complete the purchase of the new one) it stands to reason that there is a higher than normal rate of fallen transactions. With all the moving parts in a home sale; inspection, appraisal, buyer’s final underwriting approval; it stands to reason some contingent sales get delayed or don’t happen at all and therefore the primary purchase transaction falls. If a sale does fall through though, typically it’s not taking long to find a new buyer for that home. If the home was desirable to one buyer it will be to others so it’s usually not a big challenge to get the home resold. I have to admit we are experiencing great results on the contingent offers my clients have accepted. We really do our due diligence and I believe that leads to higher quality contracts that actually close.