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Despite Price Spike, No Evidence Of Housing Bubble

Along with rising home prices, there has also been increasing concern that the housing market may be entering a bubble. And that’s not surprising, considering the housing crash is still fresh in peoples’ memories. So as home prices reach or exceed previous highs, potential buyers and current homeowners are naturally concerned about the possibility of another housing bubble and crash. According to a recent analysis from Freddie Mac, however, there is a pretty good reason to doubt that today’s price spikes are, in fact, evidence of an emerging bubble. Put simply, one of the primary reasons bubbles form is a perception that home prices will always rise. This causes investors to bid prices up and some mortgage lenders to offer easier credit. In short, a bubble isn’t real. Today’s price increases, on the other hand, are being driven by a lack of for-sale inventory and slower-than-normal new home construction. That means, it is more likely that prices aren’t being driven upward by irrational confidence but, instead, are being driven by an unbalanced market. “The evidence indicates there currently is no house price bubble in the U.S., despite the rapid increase of house prices over the last five years,” Freddie Mac’s chief economist Sean Becketti said. “However, the housing sector is significantly out of balance.” More here.

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Figuring Out The Best Down Payment Strategy

Coming up with a down payment strategy can be difficult for some buyers – especially first-time home buyers who don’t have the benefit of a home to sell. In fact, among first-time home buyers, nearly 60 percent put less than 20 percent down on their house. And while that can be a good option for some buyers, it does have downsides. For one, smaller down payments typically mean you’ll have to pay mortgage insurance. It also means you may be edged out when making an offer on a home. Data from Zillow shows that buyers with larger down payments are more likely to get their offer accepted. On the other hand, waiting to save a larger down payment means risking an increase in home prices that makes it so you can’t afford next year what you could afford right now. What is the best move for today’s buyer? Well that depends a lot on their personal financial situation and how much they already have saved. But, according to Zillow, the median home will be worth just over $6,000 more next year at this time – which means you’ll have to save an additional $105 per month to cover the rise in prices. More here.

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Housing Sentiment Cools Heading Into Fall

There are many reasons autumn is a good time to buy a house. But, because spring and summer are traditionally seen as the best seasons for home shoppers, the housing market often cools in the months following its busiest season. Evidence of this can be found in Fannie Mae’s most recent Home Purchase Sentiment Index. The index – which asks Americans for their feelings about buying and selling homes, mortgage rates, home prices, etc. – reached an all-time high in September but saw a decline in October. In short, fewer Americans feel now is a good time to buy or sell a house. But that’s normal, according to Fannie Mae’s chief economist, Doug Duncan. “The modest decrease in October’s Home Purchase Sentiment Index is driven in large part by decreases in favorable views of the current home-buying and home-selling climates, a shift we expect at this time of year moving out of the summer home-buying season,” Duncan said. “Indicators of broader economic and personal financial sentiment remain relatively steady.” In other words, because Americans generally feel better about their economic security, the dip in sentiment is likely to be temporary. More here.

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Early Forecast Sees Housing Gains Next Year

This year’s real-estate market has been a mixed bag. On the one hand, demand from home buyers has been strong and an increasing number of renters say they hope to one day own a home. But though there has been strong demand from buyers, there has been a lack of homes available for sale in many markets. Low inventory has caused home prices to continuing rising and sales – though higher than the year before – to fall below expectations considering the level of demand from potential buyers. So what’s in store for next year? Well, Lawrence Yun, the National Association of Realtors’ chief economist, sees improvement. According to Yun, continued economic gains should lead to more home sales and more new home construction. However, because for-sale inventory will remain a concern, Yun is cautiously optimistic. “An overwhelming majority of renters want to own a home in the future and believe it is part of their American Dream,” Yun said. “Assuming there are no changes to the tax code that hurt homeownership, the gradually expanding economy and continued job creation should set the stage for a more meaningful increase in home sales in 2018.” More here.

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September Home Sales Improve Slightly

After consecutive months of decline, sales of existing homes – including single-family homes, townhomes, condominiums, and co-ops – rose 0.7 percent in September, according to the National Association of Realtors. The improvement may have been even greater if not for lack of inventory in some markets and the effects of recent hurricanes in Texas and Florida. Lawrence Yun, NAR’s chief economist, says the fact that there are too few homes for sale has been holding the housing market back, as there has been no shortage of interested home buyers this year. “Realtors this fall continue to say the primary impediments stifling sales growth are the same as they have been all year: not enough listings – especially at the lower end of the market – and fast-rising prices that are straining the budgets of prospective buyers.” But while inventory has been an issue this year, recent data shows listings have been on the rise lately. In fact, they were up another 1.6 percent in September. And, following the busy summer sales season, competition for available homes usually begins to cool, meaning there may be good opportunities for potential home buyers who want to take advantage of improved conditions this fall. More here.

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List Ranks Top Cities For Trick-Or-Treating

If you have kids – or have ever been one yourself – you know that Halloween is an important time of year. The opportunity to amass large quantities of free candy is irresistible to most kids. Combine that with the chance to dress up in costume and parade through the streets and Halloween becomes one of the year’s most anticipated days. Because of this, Zillow ranks the best cities for trick-or-treating each year. Their rankings are based on home values, the share of population under 10 years old, and single-family home density. This year, five of the top 10 cities are in California, with San Francisco topping the list. Of course, much of that has to do with higher home values in the West, but kids in Los Angeles, Sacramento, San Jose, and Long Beach can look forward to a happy Halloween this year. Other cities that made the top 10 included Philadelphia, Baltimore, Washington D.C., Milwaukee, and Seattle. But regardless of where you are, Dr. Svenja Gudell, Zillow’s chief economist, says there’s a surefire way to tell the best local neighborhoods for trick-or-treating. “These are places we think will have plenty of candy and lots of young kids running around from door to door,” Gudell says. “If you don’t live in one of these cities, look for areas that are getting into the Halloween spirit with decorations and lots of costumed kids.” More here