Homesellers should consider the pricing resurgence as a temporary opportunity, and not think that we’re back on track and expect big gains every year. By looking at this graph, it appears that the recent gains are almost entirely attributed to lower mortgage rates.
Here is a look at how the change in rates have impacted this house value index. There was an inflection point in early 2012 where the combination of dropping rates and low home prices reached its ideal mix, and now values have bounced back some to compensate.
But if the rates dropping into the low 3s are what caused the turn-around, then there won’t be much propulsion to keep it going from here except Shiller’s idea of “animal spirits”:
(click on image to enlarge)
Americans are payment shoppers, and don’t mind paying a higher sales price as long as the payment stays about the same. This alone should keep a throttle on rising prices.
Lowest rates just mean that the sellers can inflate their price a little more as buyers can afford more with the same monthly payment.
I’m paying about $200/month now on a $418k house @ 3.875% than I did on a $286k house @ 7.75% for example.
You can bet that the Fed will continue to keep interest rates low.
Right now everyone wants everything for free.
The longer politicians can keep the plates spinning the longer they’ll get to stay in power
I wasn’t around in the 70s, but what will inflation do to housing? The Fed can only print money out of thin air for so long before we start having to raising interest rates.
The 70’s had households converting from single to dual income, thereby more than offsetting the increase in rates.
http://www.zerohedge.com/contributed/2012-12-29/another-california-housing-bubble-possible
Check out the historical payment chart.
His specialty is drama and hysteria – look at him fall in the trap of describing the rise in prices by using the median sales price:
Cash buyers paid a median $263,000 for purchased homes, and this is up a stunning 27 percent from last year showing the massive pressure being brought on by low inventory.
If every argument revolves around the median sales price, you are going to come to wrong conclusions most of the time.
His historical payment chart concludes that home buyers can’t afford a higher payment?
It seems that he has his conclusions, and then bends the evidence to back them.
He also loves to say that FHA is a “major part” of what is pulling buyers off the fence. He should try to win a bidding war with an FHA buyer.
There were 3.4% of the NSDCC detached-home sales that used FHA in 4Q12.
tj & the bear said:
So will we need to convert to multi-generational homesteads now?