Low Mortgage Rates Push Housing Toward Bull Market Territory

• Tweet

As home supplies fall nationwide, buyers find themselves in a quandary. Mortgage rates are low and low-downpayment programs plentiful. However, there's very little housing stock from which to choose.

Competition for homes is heating up. The Buyers' Market is ending.

Click here to get a mortgage rate.

Home Supply Down 51% In 18 Months

According to the National Association of REALTORS®, Existing Home Sales rose to 4.57 million units last month on a seasonally-adjusted, annualized basis. This represents a 4 percent increase from December's revised figures and puts the benchmark figure at a 20-month high.

Not since May 2010 -- at the tail-end of the federal home buyer tax credit program -- have so many existing homes sold in a month. An "existing home" is a home that's been previously occupied and is not new construction.

Beyond the headline stats, though, there's a lot about which today's sellers should be excited -- beginning with the national home inventory.

With just 2.31 million homes for sale nationwide, the national housing stock is at a 5-year low and falling fast, down 21% from just a year ago. Furthermore, with low mortgage rates and an improving economy stoking U.S. buyers into action, at the current sales pace, the complete U.S. home inventory would be depleted just 6.1 months from now.

That's more than twice as fast as compared to July 2010.

Furthermore, analysts say a 6-month supply represents a market "in balance". Anything less is considered Bull Market territory and we're headed there shortly.

Click here to get a mortgage rate.

First-Time Buyers Support Long-Term Growth

The Existing Home Sales report showed other important notes, too.

First, it was noted that for the third straight month, 33% of purchase contracts "failed". A failure occurs when a buyer and seller agree on terms for a home, but never reach a settlement date.

Contract failures can occur for a multitude of reasons including major home inspection issues; appraisals failing to support a purchase price; and, mortgage turndowns for some reason or the other. They're also more common than ever before.

Click here to get a mortgage rate.

Last January, just 9 percent of contracts failed.

That said, there are lot of buyers still closing on their home and first-time buyers make up a growing share of them -- a good sign for the housing market overall.

In January 2012, home buyers were split by "type" as follows :

• First-Time Buyers : 33 percent of all home buyers
• Repeat Buyers : 46 percent of all home buyers
• Real Estate Investors : 23 percent of all home buyers

In addition, 35 percent of all January's existing home sales were distressed. That is, they were either a foreclosure or a short sale.

This is all good news for the housing market. First-time buyers can provide a market floor, buying entry-level homes which frees prior owner to "move-up". This is especially important in our improving economy. Large groups of would-be sellers have been "stuck" since 2009. With more buyers in the market, the chance to make a move -- either to accomodate a growing family or take a new job in a new city -- grows.

The abundance of no-downpayment and low-downpayment mortgage programs helps, too. The FHA's 3.5% downpayment has been a boon for mortgage markets, as has the VA's 100% mortgage program for military persons and the USDA's 100% mortgage program for homes in suburban and rural areas.

Click here to get a mortgage rate.

Get A Mortgage Rate On A Low-Downpayment Loan

You don't have to be a first-time home buyer to get a low-downpayment or no-downpayment loan. Move-up buyers get them, too. And with mortgage rates still low, there are some great, long-term deals out there. If only there were more great homes for sale!

Check your budget. What can you comfortable afford to spend on housing each month? Do the math with today's mortgage rates, too. There's no substitute for the real thing.

Click here to get a mortgage rate.