The housing market is a fickle mistress. She teases, she tricks, and she's known for rapidly-changing sentiments.
For homeowners and homebuyers trying to maximize their housing investments, her sordid ways can have a significant impact on monthly budget outlays and overall net worth.
She’s worth your informed attention. Just ask the folks who bought homes in 2007, before last decade's downturn; many will eagerly share how buying a home can alter your financial situation and perspective.
There’s no shortage of opinions on the state of the U.S. Housing Market. The data doesn’t lie, however, and it paints a fairly clear picture of what home buyers and sellers should expect through the end of 2014 and into 2015.
One set of data reigns supreme -- Supply vs. Demand -- and, currently, supply remains tight.
Consider that in 2006, U.S. builders were building homes at a rate of 2.3 million units per year. Today, however, post-downturn, annual housing starts average closer to 687,000.
This is an incredibly low figure -- especially in context of the historical norm for Housing Starts. It used to be rare to see Housing Starts fall below one million units per units.
Even during recessions, starts remained high.
After this latest downturn, though, Housing Starts failed to rebound as quickly.
In July 2008, Housing Starts fell below one million units as last decade's recession got underway. It would then take 55 months for Housing Starts to cross back over 1,000,000 units annually -- nearly eight times as long as after the recession of 1981-1982, which many consider to be a deep one.
Today, annualized Housing Starts are closer to 1.1 million homes, but because the new construction market flailed over the last 3-5 years, builders have failed build enough homes to meet demand from buyers.
Whether this is a good problem or a bad one depends on your perspective.
Home supplies went from abundant to scarce and home scarcity has pushed home values back to pre-2007 levels in many U.S. markets. This is terrific for existing homeowners wanting to sell, move-up or move out.
It's a plus for refinancing homeowners, too.
For today's active buyers, though, scarcity has affected home affordability. In San Francisco, for example, the median priced home is "affordable" to just 16% of the city's population. In New York, that figure is 24 percent.
And, it's an issue which may not remedy quickly. In addition to new homes, active builders are in short supply, too. Many bankrupted during last decade's recession so there are fewer home builders to meet today's live demand.
With shortages of both capacity and product, prices rise. This is simple economics.
For first-time buyers, though, the issue goes deeper. Builder capacity issues mean that -- at least initially -- a builder's limited resources will be focused of its most profitable markets, which includes luxury homes and homes for move-up buyers.
First-time buyers are expected to receive very little attention which will, likely, increase the costs of homeownership through 2014 and into 2015. Then, once builders have met the demand of their most profitable markets, they'll staff up to meet ongoing demand for starter homes.
Builders are building new homes and neighborhoods in 2014, but they're catering to the profitable move-up buyer. For a first-time buyer, scarcity of product is likely to lead home prices higher. Furthermore, mortgage rates are expected to increase -- adding to the monthly cost of homeownership.
Rising prices and rising rates are two good reasons to purchase your new home sooner rather than later. Compare today's live mortgage rates and see how much home you can afford. Rates are available online at no cost, with no obligation, and your social security number is not required to get started.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.