Inventory Down, Interest Rates and Prices Up: U.S. Housing Market Heats Up
by Joel Carson
Utah Real Estate
SLBR 2012 ‘Salesperson of the Year’
The national housing market is getting stronger as potential buyers keep their eyes on interest rates destined to climb higher. If you’re shopping for a Salt Lake City home for sale, don’t wait until the market rebounds completely or you’ll end up paying more for your home at a higher interest rate than rates available now; and, your home choices could be limited.
Buyers have enjoyed a housing market in their favor for several years now, but pending home sales rose nationally in May to the highest level since late 2006, according to a June 27 report published by the National Association of Realtors. An increase in mortgage interest rates may have sparked the increase.
Today Deseret News Writer Jasen Lee reported that in the last week interest rates for a 30-year, fixed-rate loan rose to about 4.75 percent — up more than a full percentage point from mid-May.
Lee interviewed Mark Vitner, managing director and senior economist for Wells Fargo who said, “ ‘Any negative impact from the rise in interest rates is probably more than offset by stronger job growth, stronger income growth and more construction activity.’ ”
The Pending Home Sales Index is a forward-looking indicator based on contract signings. That index rose 6.7 percent to 112.3 in May from a downwardly revised 105.2 in April. The May index is 12.1 percent higher than it was in May 2012 (100.2). This data is a reflection of contracts, but not closings.
NAR reported, “Contract activity is at the strongest pace since December 2006 when it reached 112.8; pending sales have been above year-ago levels for the past 25 months.”
It Couldn’t Last Forever, Look on the Bright Side
We knew affordability conditions would change; but, some did not anticipate interest rates would change so soon.
On the upside, jobs are increasing throughout the United States and we are seeing a steady increase in Utah jobs. Trust me all of this is great for the overall health of the American economy.
The Utah Department of Workforce Services reported Utah’s Unemployment Rate at 4.6 percent in May (the most recent statistic available) compared to the United States’ Unemployment Rate of 7.6 percent. Utah’s job growth rate was 1,282.7 in 2013, 2.6 percent higher than the 1,250.1 jobs in 2012.
From May 2012 to May 2013 the information industry saw the most growth, 8.6 percent; government jobs declined 2.3 percent according to the U.S. Department of Labor. Utah’s year-over nonfarm growth was reported at 2.6 percent; the United States’ year over nonfarm growth came in at 1.6 percent. The economic upturn is encouraging and consumer confidence is rising with the economy.
In a July 8 article by Associated Press Economics Writer Christopher S. Rugaber it was reported that, “U.S. employers are sending a message of confidence in the economy — hiring more workers, raising pay and making the job market appear strong enough for the Federal Reserve to slow its bond purchases as early as September.”
The U.S. Labor Department’s most recent report noted the U.S. job market is “showing surprising resilience in the face of tax increases, federal spending cuts and economic weakness overseas. Employers have added an average 202,000 jobs for the past six months, up from 180,000 in the previous six,” Rugaber reported.
Consumer spending and the housing recovery could be influencing job growth too. Consumer confidence is higher than it has been for almost six years and that means people are buying homes, cars and other big-ticket items in addition to spreading around expendable income more freely.
Future Looks Bright
Lawrence Yun, NAR chief economist, upgraded the price forecast for 2013, with the national median existing-home price expected to rise more than 10 percent to nearly $195,000. This would be the strongest increase since 2005 when the median increased 12.4 percent. The median sold price for Utah homes during the second quarter this year was $206,500.
Existing-home sales are projected to increase 8.5 to 9.0 percent, reaching about 5.07 million in 2013, the highest in seven years; it would be slightly above the 5.03 million total recorded in 2007.
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