Home sales are selling ultra-quickly, according to the National Association of REALTORS®.
In May, the average home sold in just 27 days, undercutting the previous record of 29 days set in April.
Sales numbers suffered due to low inventory.
5.62 million existing homes sold on a seasonally-adjusted, annualized basis last month. Sales increased by 1.1% from the month prior, but they are nowhere near adequate levels to satisfy demand.
If home buyers could find homes to buy, they would. But homes are getting snatched up -- often for cash -- in days, not weeks or months.
Homes are sold before buyers can schedule a viewing.
These days, having a full pre-approval is a requirement for any buyer. Sellers won't consider a half-baked offer: one that does not give strong evidence that the buyer is well-qualified for a mortgage.Click to see today's rates (Jun 28th, 2017)
The National Association of REALTORS® (NAR) released its May 2017 Existing Home Sales report, which showed 5.62 million homes sold on a seasonally-adjusted, annualized basis.
An "existing home" is a pre-owned house that is being sold again and does not include newly constructed homes.
May's reading continues strength seen so far in 2017. This year could be the best for home sales, eclipsing 2016 as the top 12-month period since the housing downturn.
The factor holding sales back now, though, is ultra-low inventory. As recently as 2012, home supply rose above six months, the inflection point between a "buyer's market" and "seller's market".
Existing Home Supply hit 4.2 months nationwide in May, matching April's mark, but still too low for comfort.
There are now just over 1.9 million homes for sale in the U.S. That is down eight percent from a year ago, when inventory was already tight.
It's not an encouraging statistic for home buyers. Spring and summer, inventory is supposed to increase as homeowners put their homes on the market. But buyers are absorbing any extra inventory coming online, and then some.
Low home supply is driving up prices. NAR reports that year-over-year home values have risen 63 months in a row, up nearly six percent since last year.
According to NAR chief economist, Lawrence Yun, in a press release, "Home prices keep chugging along at a pace that is not sustainable in the long run."
How long can home prices rise, and are we headed for a real estate bubble in 2017?
Not likely. Homes are still 30% more affordable than they were in the mid-2000s, and lenders aren't anywhere as loose as they were back then.
The housing market is still on solid ground.Click to see today's rates (Jun 28th, 2017)
Mortgage rates are rising, and it's lighting a fire under home buyers.
First-time and repeat buyers alike realize it's now time to buy before rates price them out of the home they really want.
May's home supply reading is evidence of the trend.
Supply is little-changed from all-time lows set in December as buyers snatched up every available home. That month, inventory fell to an all-time low of 3.6 months.
More homeowners need to sell.
Upon listing a home, sellers realize it won't be on the market long.
The NAR reports that the average home stays on the market just 27 days, down from 32 days a year ago.
The interesting thing about all this is, many renters are still putting off buying a home. Prices will go down, they say, and there will be more homes on the market...someday.
And, many think that lacking a 20% down payment puts them out of the running for a home. That's a myth. The average first-time buyer puts down just six percent.
Other buyers are PMI-averse, costing them $13,000 per year in average home price appreciation. Another mistake.
That thinking can be dangerous, though. Some have been renting for more than a decade, vaguely planning to do it "next year." Meanwhile, home prices have doubled in some areas since 2009.
For many, it never feels like the right time, and there is probably no "perfect time" to buy a home. Only "fair" and "good" times to do so. This year is well into "good" territory for home buyers, thanks to low rates and affordable home prices.
One decade from now, many will still be waiting for the ideal time to buy.Click to see today's rates (Jun 28th, 2017)
A recent report shows that homes are surprisingly affordable.
First American, a real estate title insurance provider presents a case that homes are 33% cheaper than they were at the height of the late-2000s housing market. In fact, it's not even necessary to look at a time when prices were sky-high to argue for today's affordability.
In 2000, homes were 10.3% more expensive, too, according to the study.
The company formulates an index which takes into account not only nominal home prices, but average incomes as well as mortgage rates. Those other two factors play a big part in home affordability.
For instance, a $250,000 home financed at 6% is nowhere near as affordable as one financed at 4%. The only time those two homes cost the same is when they buyer pays cash -- the minority of home buyers in today's market.
For the "everyday" home buyer, then, the interest rate matters a lot. In the example above, it's a difference of about $300 per month.
Likewise, incomes matter. The average worker makes about 22% more than they did in 2008 according to the Bureau of Labor Statistics.
So, a worker making $5,000 per month back then makes $6,100 now. That $1,100 per month goes a long way toward buying a house -- almost the entire home payment in some markets.
The next time you hear that home prices are too high, ask on what information that claim is based. Likely, it's entirely unfounded.
Mortgage rates alone are not enough to extend an opportunity to buyers. The more important piece is actually available mortgage programs.
Today's market offers first-time home buyer down payment flexibility, the likes of which hasn't been seen in nine years.
Even mainstays of affordable housing, such as FHA loans, have made it even easier to buy. Mortgage insurance premiums were reduced last year. And, more lenders are offering these loans at the FHA-suggested 580 minimum score.
Conventional lenders have eased downpayment requirements. The minimum down for loans backed by Fannie Mae and Freddie Mac is now 3%. The Conventional 97 mortgage and the HomeReadyTM loan are both lenient about the amount of money you need upfront.
HomeReadyTM is available to buyers with incomes up to 100% of the median income in the area in which they are buying. In underserved communities, the income limit is removed altogether.
The USDA home loan goes further than even FHA and conventional loans when it comes to low downpayments: it requires zero down. And, closing costs can come from a gift or even a seller contribution.
Another zero-down loan comes from the U.S. Department of Veterans Affairs. The VA loan is a veteran-only mortgage for which current and former military service members earn eligibility with as little as 90 days of active service.
These mortgage programs and others are even more affordable because of today's record-breaking mortgage rates. Home sales are rising, with little question that today's home buying environment is one of the best in history.
The U.S. housing market is advancing into 2017. It's an excellent time to buy a home, and the first step is getting a rate quote for your home mortgage.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Jun 28th, 2017)
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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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)