With the New Year now well underway, it’s become apparent that we’re off to a much better start than in 2014. Interest rates have hit historic lows once again leading to a surge of mortgage applications, inventory has been increasing across the nation, price gains have been slowing and sales have been increasing because of it. Most recently we’ve seen a yearly price gain of 7.6% in January while the demand from buyers has continued to increase – all signs that 2015 will be a promising year for real estate.
According to the new report from Redfin, the median price on a home sold in January increased by 7.6% from one year before. Although the median price was still 1.2% lower than the month before, this was roughly one-third of the of the price decline seen between the same period one year ago. This is also the smallest price decline in January since 2008, according to Redfin’s data.
It should be noted though that Redfin reports its home price data early, using projections based on sales for the first three weeks of the month, proprietary models and its own brokerage activity.
Experts believe there were several key elements that played into this change; current inventory, low interest rates and a growing demand from first-time buyers.
Similar to the recent increase in price, both inventory and demand have skyrocketed. In December, inventory increased by 4.8% year-over-year across the nation, with an increase of 9.5% in new listings – the most since 2008. In California, we saw total sales increase by 23.8% in December from the month before.
This coincides with the data from Redfin, who reported that the demand for home tours hit an all-time high throughout the beginning of the year. In January, Redfin saw an increase of 62% in tour requests and a 58% increase in signed offers year-over-year. In just the first three weeks of the year, these numbers were up 40% and 30% respectively.
Nela Richardson, Chief Economist at Redfin, believes that with an increasing demand from buyers, record low interest rates and additional homes on the market, conditions are extremely favorable as we head into 2015. Inventory remains critically low in some markets though, requiring a surge in new listings in order to keep sales volume from sinking.
This is the case in San Jose, where the number of homes listed for sale dropped by 35% in December from the month before – an 8% drop year-over-year. The metro area also saw an astonishing 76% drop in sales that same month, according to Redfin’s data.
Do you agree that conditions are favorable heading into 2015? What are your thoughts?