If you plan on selling your home 2016 is the year to do it. We had great expectations for the housing market this year—and so far, 2016 has certainly delivered. Looking back at the first half of the year, it’s all good news:
- Total home sales are up 5% compared with the first half of 2015.
- Median existing home prices are up 5% as of June, setting a new record.
- Overall, we had the best 6 months in a decade.
Plus, continued appreciation has restored home equity for many homeowners—and higher home values encourage owners consider selling and buying again (to move up, downsize, get into a better neighborhood, etc.).
So, how long will it last? Well, sorry to be a bit of a downer, but you shouldn’t expect the torrid pace to keep up in 2017.
One of the main factors driving this year’s real estate market has been substantial pent-up demand driven by demographic trends.
We are seeing more baby boomers making retirement decisions, providing inventory and powering sales. Gen X–headed families are active in the market this spring and summer because of improving economic circumstances.
But even with all that demand, the market can grow only so much, because of the limited inventory of homes for sale. At today’s pace of sales, existing home inventories would be completely used up in 4.6 months. In June, using data from realtor.com®, we estimated that potential buyers were up 13% over last year, yet available homes for sale were down 5%.
Sales so far this year have been able to grow because inventory has moved more quickly. We’ve seen some of the lowest amount days on market for listings in May and June.
But we can’t continue to squeeze out more sales by upping the pace. We are likely close to the limit of how fast inventory can turn over. Eventually, without substantially more homeowners putting their homes up for sale and more construction of new homes to increase inventories, sales growth will probably flatten and even decline.
So as a result of a very strong spring and summer leaving us with low inventories, mortgage rates potentially moving back up, and the presidential election creating more uncertainty, we may see a weaker housing market in 2017. However, given the performance so far this year, 2016 should end as the best year in a decade.
Let’s take a step back: All this does not mean that 2017 will be bad. As long as rates do not increase substantially in a short period of time (such as 100 basis points over the next six months), the real estate market should remain strong. After all, the underlying reason for higher rates is a stronger economy; so the benefits of that will offset the impact of marginally higher rates.
A stronger economy, more jobs, lower unemployment, and higher wages will power demand. Higher rates will also likely help loosen credit. Those positive conditions coupled with demographic tailwinds from millennials and baby boomers will keep the U.S. housing market healthy and strong for at least two more years.
We knew this year and this spring would be strong. Sellers must take advantage of it while it lasts. If you are considering selling you should get that process started right away. Time is running out to sell over value and the clock is ticking now louder than ever.
The opinions expressed here within are my own completely independent of BHGRE Coccia Realty and its owners and subsidiaries.
Thinking of buying or selling a home? Contact me for a Real Estate consultation. My information is below. I look forward to hearing from you.
Raymond Ciampaglia, Realtor®
Better Homes and Gardens Real Estate | Coccia Realty
424 Valley Brook Ave | Lyndhurst, NJ 07071
Office: (201)939-8900 | Fax: (201)939-8910
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