The housing market has been in a slump, since it crashed in 2008. Here we are, three plus years later, and it just might be showing signs of making a bit of a comeback.
I’ve got to admit that, here in North Dakota, we never really directly felt the housing market crash. With all the oil flowing in the western half of the state, and the resulting high demand for housing, our market has remained pretty close to level. In the western part of the state, there’s such a demand for housing that the home builders can’t keep up, and prices have gone up by quite a bit. Here in the eastern half, our market has kept steady, with only some minimal gains, but the number of homes available has stayed low.
Other parts of the country weren’t as lucky to have an oil boom going on at the same time as a major market correction, however, and certainly felt the crash a whole lot more than we did. Recently, I’ve read several articles on the increase in inventory churn in some key areas.
Housing Market Key Factors
I’m no expert in the housing market, but I think that there are several key factors that might be contributing to a market comeback. Interest rates remain low around the country, with many qualified buyers getting home loans with loans that are below 4%. As a comparison, the home loan rates in Australia are near 6%. As a further comparison, when my wife and I bought our house in 2004, the rate we got on the house was almost 7%. Another key factor, in my opinion, has been the rising of new home construction. As the market crashed, the rates dropped, but the number of people who still qualified under new, stricter lending policies dropped too. The lower number of qualified buyers meant that there were less houses being bought, and built. Rates are still low, but the number of new homes constructed has gone up several months in a row. The people who survived the crash without bankruptcy are building homes. That also means that they are likely selling their old homes, if they have them, and putting more lower cost houses into the market. Those lower cost houses in the market could lead to more people buying houses and becoming first time homeowners. The final factor that I think is contributing to a resurgent housing market is the leveling off of the job market. With several months of gains in the job market, the employment situation appears to have leveled off some which should make people feel more secure in their employment situation and decide to make the jump into home-ownership.
Should you Buy a House?
Anytime we start talking about the housing market, the inevitable question comes up of whether a person should buy a house now or not. I’m not trying to avoid the question, but it really comes down to your personal situation. Your primary home still isn’t an investment. Your local market should also be taken into account. What are the rental rates in your area? What would the mortgage payment on a house be? Is the rent for a similar house more or less? Is your financial situation stable? Do you have savings for a down payment? With enough left over to pay closing costs? Do you have an emergency fund in place to pay for any unforeseen emergencies that might occur after you move in? Spending thousands of dollars isn’t something that anyone should rush into. Run the numbers on your financial situation, then run them again. Sleep on it for a while, and then decide if now is a good time for you to consider buying a house.
What’s the housing market like in your area? Did your market feel the crash?
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The housing market is heating up in southern California. Any homes under $500K have multiple bids which raises the prices. It is getting competitive again.
In my area in the Northeast, prices have stabilized. For a few months they were rising, but now they are flat again. But, I think that is what is typical with housing prices. The run we experienced with 10% plus gains per year are not normal. 3% is more normal and that has been the case here recently.
Things have definitely turned around in Michigan for houses in the 100-300k range. We bought our house in 2007 at a 15% discount from its peak value, thinking it was a steal, but of course it fell another 20-25% after that. The last year has seen it level off and actually gain a few percent in value. Houses in good shape in the range I mentioned above are typically now selling within a couple of weeks, usually at or even above asking price, often with multiple offers. It’s definitely returned to a sellers market if you have the right type of house in the right price range in the right condition.
We’ve been watching the local market for over a year. Sales prices haven’t really changed, but some sellers seem to think the market is back to pre-crash prices. There is a lot of old inventory that is not moving because sellers aren’t willing to lower their prices.