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Bullish on Buying?
Question: Real estate values in our area increased strongly in 2015 and are predicted to go up this year, too. Doesn’t this mean that now is the time to buy, before prices go higher still?
Answer: The future remains a mystery, despite the best efforts of economists and soothsayers to tell us what will happen tomorrow.
Last year was the best for the existing market in many years. According to the National Association of Realtors, sales for 2015 hit 5.26 million, the highest annual level since 2006. National median home value in December rose to $224,100, up 7.6 percent from December 2014, marking the 46th consecutive month of year-over-year price gains.
NAR also says metro areas are doing well. According to the association’s most recent figures, 154 out of 178 metropolitan statistical areas saw year-over-year price increases in the third quarter of 2015.
That said, the market’s performance in 2015 tells us nothing about the future. It also says some cautions are appropriate.
Think back to 2007. Home values were soaring. Someone looking at pricing figures that year might have been justly amazed at the rising values seen nationwide. As it happens, 2007 was also the year when prices peaked. According to the Federal Housing Finance Agency, home values in the third quarter of 2015 were actually 3.7 percent lower than in 2007. For that reason loan limits will be largely unchanged in 2016.
Notice what the metro area price numbers tell us. Most, but not all, areas enjoyed price increases in the third quarter. Values fell in 24 areas.
Even in areas where prices are rising it does not mean all home values are increasing. According to Weiss Residential Research, the percentage of homes losing value increased during the quarter, from 23.40 percent in July to 26.37 percent in September.
By a lot of measures, the economy in general is doing better. In particular, job numbers look good. This is positive for housing, because with rising incomes more people can consider buying.
Just as in 2007 we don’t know with certainty that home values will go higher. It seems logical that they should; we still have not caught up with 2007 values, the population has grown and mortgage rates remain low. But logic does not necessarily reflect what will actually happen.
Real estate is a local business so what the economy does nationally or in most metro areas may not be relevant in your situation. Look closely at the trends in the market where you want to buy and talk to real estate brokers. Ask about the job base and the local population. Is a lot of new construction coming on the market? How do prices and unit sales compare with the past few years? What type of fixed-rate financing is available at par?
With more and better information you can make a better decision.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to email@example.com.View Foreclosure Article Archives
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