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Real Estate in the Spring Warms

By Brian Kline | April 13, 2015

As the flowers bloom and temperatures become milder, so does the real estate market and most experts expect it to be an active one this spring, summer, and fall. Nation-wide, housing prices rose 5.7 percent in January, year over year. Some say that is a sustainable rate of appreciation. However, the Department of Labor's Consumer Price Index shows that as of February, the CPI was unchanged over the past 12 months, after showing a 0.1-percent decline for the 12 months ending in January. Housing prices are certainly fast outpacing inflation.

house with black shutters

What to Expect From This Spring's Real Estate Market

Far from when prices bottomed out, prices are now hitting record highs in places like: Colorado, Texas, Wyoming, and New York. Not everywhere, but in these places some economists are starting to worry about localized bubbles.

Averaging less than 3.7 percent, mortgage rates are haven’t been this favorable to consumers since 2013. This will drive a buyer demand for home buying but that demand will favor sellers to set higher prices. The interest rate is expected to rise throughout the year and the rise can be expected to be triggered by strong demand this spring that will continue into the summer and fall. Buyers' with a closing date should be locking in these low rates as soon as possible.

Inventory stands at slightly less (-0.5%) than a year ago. Still, most buyers are looking for turnkey properties that are ready to be moved into. Especially first time buyers with little cash reserves that don't want homes where they have to assume any risk or pay for repairs.

With foreclosures at the lowest level since 2006, these are no longer a pricing factor in most real estate markets. In recent years, because of foreclosures, those interested in primary residences found themselves competing with investors. This spring likely marks the end of the opportune investor market cycle. Buyers will be competing with others buyers rather that with investors.

Still Cheaper Than Rent

With all that being said, many might think this is not a time to buy a home. However, the fact is that in many places, it's less expensive to buy than it is to rent - as long as you can come up with the down payment. That includes the costs of property taxes and insurance because you ultimately pay those as a renter along with a profit to the owner.

In addition to low interest rates, overall homeownership costs are down. Fannie Mae and Freddie Mac have introduced new lending programs allowing borrowers to put just 3.5 percent down on a home. However, buyers sill need to carry private mortgage insurance at these low down payments. The good news is that the Federal Housing Finance Agency recently reduced the cost of mortgage insurance by half a percentage point that will save the average homeowner about $900 per year.

The news and numbers might not be what home seekers want to read but the fact is, it's likely to be many years before the real estate market favors buyers more than it does today - even if it is a seller's market.

Please leave a comment if this article was helpful or if you have a question.

BioAuthor bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
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