There’s no denying it; summer is upon us, and the weather isn’t the only thing heating up. As the days have been getting hotter, so has the real estate market, so much so that home sales are on pace for their best year since 2007. Now, agents and brokers everywhere are wondering if 2015 will turn out to be the best year for business in nearly a decade.
Real estate has gotten hot again. First-time buyers are streaming back into the market. Prices are skyrocketing, aided by a stronger job market and tantalizingly low mortgage rates that are creating pressure for buyers to act fast. Home sales are on pace for their best year since 2007.
Buyers are more confident about their own prospects. But many also appear ready to close sales quickly because of concerns of being potentially priced out of the market by rising mortgage rates and home values.
“What we’ve seen is that demand is off the charts in 2015 — and that is really boosting sales,” said Nela Richardson, chief economist at the brokerage Redfin. “Last year, buyers were dipping their toes in their water. Now, they’re diving in.”
The National Association of Realtors said Monday that sales of existing homes climbed 5.1 percent in May to a seasonally adjusted annual rate of 5.35 million – the third consecutive month of the sales rate exceeding 5 million homes.
Yet listings have failed to match the greater demand, fueling large price gains. Median home prices climbed 7.9 percent over the past 12 months to $228,700, about $1,700 shy of the July 2006 peak.
Several factors help to explain the surge.
First, employers have hired 3.1 million additional workers in the past year as the unemployment rate has slid to 5.5 percent from 6.3 percent. This influx of additional paychecks has led more Americans to feel financially secure after weathering the most severe downturn — sparked by a housing bust — since the 1930s.
Secondly, mortgage rates are affordably low but beginning to rise as the Federal Reserve prepares to a key interest rate for the first time in nearly a decade.
Rising home prices have also added an extra sense of urgency among homebuyers.
Lastly, the rising prices mean that more homeowners are starting to regain the equity lost in their homes during the downturn. The number of mortgage holders who owe more on their loans than their homes are worth has tumbled 19 percent in the past year to 5.1 million — or 10.2 percent of all mortgaged properties, according to real estate analytics firm CoreLogic.
Overall supplies still remain tight. But because more mortgage holders are recovering equity, more of them can afford to sell their home and use the proceeds to buy a new home, creating greater demand.
Have you noticed the recent bump in sales? Are there other factors driving the latest surge in business? We’d love to hear your thoughts!
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