A recent article in CNN Money focused on looking ahead to next year’s housing market. The good news is that house price gains are expected to be just half of those seen this year, something that is essential for a sustainable recovery.
Even so, it’s being forecast that the median home value for next year will increase by 6.8%. The number of homes for sale is already improving, and rose by 1.8% in September compared to a year earlier. This might not sound like much but it’s the first increase in figures seen since late in 2011. Inventory levels in Atlanta, Los Angeles and Orlando have increased by 10% compared to a year earlier. In spite of this is still expect to be a seller’s market next year as inventory levels have a long way to go before they’re considered normal. At the moment levels are still 15% below historical norms.
In spite of this, conditions will improve for buyers as there are expected to be fewer real estate investors due to the fact that there will be fewer distress sales. In September investors accounted for 17% of residential home purchases compared to 23% year earlier. It might seem tempting for buyers to hang on until inventory levels improve, but 30 year fixed rate mortgages are expected to increase from 4.5% to figures in excess of 5%. Loan availability is improving, but some real estate agents are finding certain lenders are too slow. It’s being suggested that buyers should stick to using local lenders that have connections with local appraisers. In some cases it’s possible to get a home closing within 20 days.
Even though some markets are beginning to experience bidding wars, the final price is still likely to be one percent below listing price, but this does mean it’s important to go in with a credible offer. Sellers with multiple bids will not bother to come back to a buyer who has made a lower bid than other interested parties.
The improving market also offers greater flexibility for homeowners, as greater equity makes it easier to borrow against the home or to pay for home renovations that have been deferred. It is expected that spending on home improvements will increase considerably next year, and top of the list are bathrooms and kitchens. Sellers are reminded to keep resale in mind, and a recent survey found that moderate kitchen renovations could recoup up to 69% of the cost, but projects that are over the top will recoup less than 60%.