Unfortunately for home buyers, the days of buying at the bottom of the market for a great price are gone. Anyone considering purchasing a home should do so without hesitation. Consider the following key indicators:
- Pent-Up Buyer Demand – Concern over falling prices and an inability of current homeowners to sell their existing homes so they can buy another home, has kept most buyers on the sidelines. As sales activity improves and new households are created, buyers can expect stiff competition in the near future from a flood of new buyers entering the market.
- Mortgage Availability – Banks are sitting on piles of cash. With lending standards finally loosening and attractive lending programs being offered by FHA and VA, buyers previously unable to quality for a home will find it much easier this year. The pendulum has finally begun to swing the other way.
- Investment Opportunities – With investments like stocks and gold at or near record highs, the best returns have already passed. While real estate has yet to realize the highest returns from a recovery, buyers are already encountering fierce competition from investors. This is likely to only get worse as news of the great real estate recovery in 2013 is published. With real estate prices still down 30% or more from their highs, there’s still a great deal of recaptured appreciation available to buyers.
- Economic Recovery – All key economic indicators have recently shown improvement. The Dow Jones Industrial Average is over 14,000, within 100 points of an all-time record high. The auto industry has completely recovered, with sales expected to reach 15.5 million units this year. Construction activity is stronger than it’s been in over 10 years. Corporate profits and cash reserves remain strong and unemployment continues to drop.
- New Construction – New home sales in January increased 29% year-over-year despite the fact that new home prices were on average, 37% higher than existing home prices. Last year, home building activity accounts for 25% of the Gross Domestic Product, or GDP in the US. The recent dramatic increase in new construction will be the leading force for the great economic recovery of 2013, further minimizing risks for buyers.
- Interest Rates – At the mid-February Federal Reserve’s Open Market Committee meeting, nearly 50% of its members were in favor of raising rates. Buyers can expect to pay more in mortgage payments from an increase in interest rates in the near future.