As we roll into spring, the U.S. housing market continues to grow and improve. For homeowners, the continued improvement of the housing market is fantastic news.
For homeowners, the last four or five years have been a roller coaster. First came the peak of the housing bubble, followed by its inevitable crash. Millions of homeowners found themselves underwater and under the threat of foreclosure while others, who might otherwise have sold their homes during a healthier market, found themselves with few options until the market recovered.
However, beginning in 2012 the housing market started to rebound, and homeowners began finding themselves in dramatically improving situations. 2013 saw home prices skyrocket, increasing by double-digit percentages, and things continued to improve in 2014, though more slowly. Today, the housing market finds itself in “full bloom,” steadily improving and bringing even more good news to homeowners.
1) The 2014 Recovery and Where We Stand Today
Several factors fueled the housing market recovery of the last few years. From 2012 to the end of 2013, the housing market rebounded drastically. As economic conditions began to improve, investors and other buyers helped clear the inventory of distressed homes, buying undervalued homes in foreclosures or short sales.
With fewer distressed properties weighing down home prices, prices were able to start recovering. At the same time, homebuyers entered the market faster than homes became available, and simple supply-and-demand furthered the spike in prices.
According to the National Association of Realtors, the national average home price increased 11.5 percent over 2013 compared to 2012, the strongest gain in home prices since 2005. Homeowners who found themselves underwater on their mortgages during the housing market crash finally regained much of the equity they lost.
In 2014, home price growth slowed. With fewer low priced homes for sale and more balanced levels of supply supply-and-demand, price increases normalized. Home values still increased, though more modestly.
Today, home prices continue to increase at the more sustainable level (still growing, but without sidelining new buyers). This year, the housing market will depend more on job growth, rising incomes, and more new homeowners entering the market to fuel growth.
So, what does all of this mean for current homeowners? No matter what your situation was during the peak of the housing market crisis, chances are your situation has improved dramatically due to the huge gains we’ve seen in the housing market. If you’re thinking of selling your home, now may be the perfect time.
2. Home Prices Have Increased, And Will Continue To Do So!
As mentioned previously, from 2012 to today home prices have increased significantly. According to the investment group BlackRock, home values appreciated more than 20 percent since the first quarter of 2012 to the end of 2014, bringing many homes close to their pre-crisis peak prices. This dramatic increase in prices helped more than 4 million homeowners regain equity in 2013, and millions more in 2014.
This year, experts predict home prices will rise 4 to 5 percent. Two primary factors will continue to help push home prices up: the number of homes for sale remains low compared to historic numbers and demand, and the demand for homes continues to increase as economic conditions improve.
With the growth in home prices slowing to , many homeowners are now looking to, many homeowners are now looking to sell their homes and take advantage of the low mortgage rates available today.
3. Mortgage Interest Rates are Low Now, But Rising This Year
In recent months, mortgages rates have hovered at yearly and near historic lows. Towards the end of last year, mortgage rates hit a low of 3.89 percent.
Since then, they have started to increase. According to the Mortgage Bankers’ Association, 30-year,fixed rate mortgages will rise to 4.5 to 5 percent by the end of the year3. The increase may not seem like much, but slight changes in mortgage rates can have a big impact on your ability to buy a new home.
A 1% increase in rates can reduce your buying power by as much as 10%4.
As the year goes on, buying a new home will become less affordable because both home prices and mortgages are increasing. Rates are expected to start increasing around the middle of this year, so if you’re thinking of selling your home and buying another, you need to act fast to take advantage of these
What’s Your Home Worth Today?
If you have been waiting to sell your home, especially if you or someone you know is having difficulty with their mortgage, it is time for you to start exploring your options. Your home is likely worth more than you realize, and right now mortgage rates and home prices are opening the door for many homeowners to sell and buy homes. The most important thing, however, is to know where you stand.
Do you know what your home is worth today? What are homes in the area selling for? These are all questions to which the answers have changed significantly in the last few months and knowing what your specific situation is will help you make more informed choices.