Real estate in St. Tammany Parish and across the United States received some good news this month – home sales in May, 2013 increased by 2.1% from April, 2013 and 29% from May, this time last year. The market right now is the “perfect storm” for new home buyers. Interest rates are LOW, even with the slight increase to close to 4% up from 3.35% last month. Also, the inventory of new homes for sale is limited due to builders just getting back into production after holding off building any new homes or starting any new projects because of the Recession. Home prices are HIGH, and seem to be growing at a record pace. You wouldn’t think that higher home prices would be a measure of success of the housing industry, but higher home prices mean increased equity, which makes it easier (if ever so slightly) for home buyers to qualify for a loan and to get a better interest rate. And, finally, the last part of the perfect storm model which seems to be influencing the real estate market nationwide is the drop in foreclosures.
Foreclosures seem to be finally leaving the market, allowing for depressed home prices to rise and for the market to start to grow. In other words, we finally may be “bouncing off the bottom.” With the increase in home values (higher home prices) of 10.3% compared to this time last year, many Americans have started to see their “underwater” mortgages move back into the black. This means that they have now “freed” themselves to sell their homes and move up or sideways into a new home. Real estate agents and builders can expect to see many contingency buyers over the next months – people trying to sell their homes to be able to purchase a new one.
The new homes sales pace of 476,000 was the best number of sales since July, 2008, right before the “bottom dropped out” of the market. And according to Joseph LaVorngna, chief U.S. economist at Deutsche Bank, “Affordability remains near historic highs, despite the recent rise in rates and home prices.” Even with the rise in home pricing, home prices are still at “record affordability,” still below the pricing which occurred right before the housing bubble burst. If the housing market is truly bouncing off of the bottom, then there is only one way to go buy up!