Rising Home Prices Create Solid Investment

Housing Demand Rises

Housing starts, interest rates, home sales, home prices.

What do the four have in common?  They’re on the rise.

Let’s talk about home prices.

The price for a home will more than likely cost you less today than it’ll cost next month.  Home prices climbed by 6.3% in May, marking 39 consecutive months of year-over-year gains, according to a report by CoreLogic.

In West Virginia, realtors expect home prices to rise by 2-3 percent during the next 12 months, according to the Realtors Confidence Index Survey Report.

This creates a dilemma for home buyers and home sellers alike.

Sellers: Do you hold on to the home and let its price rise to its peak, then unveil it to the market?  Or, do you sell now while demand is high?

Buyers: Do you buy the home of your dreams now while interest rates for 30-year mortgages still hover at 4 % and home prices are still tangible?  Or, do you wait to see if home prices decrease, but risk an interest rate increase?

National Association of Realtors (NAR) Chief Economist Lawrence Yun believes buyers hold the key to the future.

“The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows,” Yun said.

What’s the rest of the nation doing?

Pending home sales in May remained the highest in more than nine years.  The Pending Home Sales Index showed June 2015 bringing 8.2 percent more for its rating than June 2014.

A recovering economy and steady home price appreciation seem to be pulling buyers into the housing market.  But, can the amount of listings meet the demand of more buyers?  It seems the demand from the influx of new buyers is greater than the supply of available homes.

Any economics professor will tell you, “When this happens, the price goes up.”

That’s exactly what’s going on.  The existing price for all housing types is expected to increase to 6.5 percent, matching the record high set in 2006.

“Buyers have come back in force, leading to the strongest past two months in sales since early 2007,” Yun said. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.”

Last month, existing-home sales increased to their highest rate in over eight years, while the effect of rising demand and limited supply pushed the national median sales price to an all-time high.

The data continues to support a strong housing demand.

This month housing starts rose 9.8% to an annualized pace of 1.174 million, the highest since July 2007, according to recent data released by the US Census Bureau.

Building permits, which point to the pace of future construction, rose by 7.4% to an annualized pace of 1.343 million.

NAR President Chris Polychron said that even with the uptick in home prices, demand remains solid.

“The demand for buying has really heated up this summer, leading to multiple bidders and homes selling at or above asking price,” Polychron said.

With interest rates hovering near historic lows, home prices increasing at above-normal rates and demand rising, the window of opportunity to jump into a thriving housing market is gradually closing.  Opportunities such as these don’t last forever.

So, this begs the question for home buyers, sellers and investors: What are you waiting for?

By Justin Waybright and Chuck Boggs