May 26th, 2015 3:10 PM by Nick Rapplean
The National Association of Realtors last week announced that home prices in our nation had climbed by 7.4% during the year’s first quarter. This would seem to be reason enough to send a new army of investors in to purchase of real properties--but therein lies the rub. There just aren’t enough new properties on their way to completion, or existing properties for sale, to satisfy the pent-up demand for homes (mainly, affordable, entry-level properties) and as a result analysts are deeply concerned that the recent growth in selling prices and volume of sales could be undercut relatively soon by 1) a lack of homes for people to buy and by 2) a faster firming of prices for those homes that are available.
How much should we worry, and will the lack of housing inventory at the more affordable end of the market bring a quick end to this apparent jump in prices and sales? Perhaps concern, but not much worry, is appropriate here.
Mine is only one guess among many, but the data just multiplied within the last few days with a solid 1.7% rise in the Pending Home Sales Index for the month of December, and an 8.4% rise in the number of signed contracts over the year. The likelihood is much larger today that the real estate market will continue to firm for the time being.
There was also an exciting break-through report. As Bloomberg noted, "today's housing starts & permits report is one of the very strongest on record, with starts soaring 20.2 percent in April to a much higher-than-expected annual rate of 1.135 million and with permits up 10.1 percent to a much higher-than-expected 1.143 million. The gain for starts is the best in 7-1/2 years with the gain in permits the best in 7 years."
Strength in starts is split between single-family, up 16.7 percent to 0.733 million, and multi-family, up 27.2 percent to 0.402 million. Single-family starts are up a very convincing 14.7 percent year-on-year with permits up only 0.5 percent."
Expectations are now much higher for building strength in housing, a sector held down badly in the first quarter by severe weather."
This is important stuff. Indeed, it could prove to be a long-awaited turning point for our real estate market--though the issue of prices rising faster than inflation and wages remains very real.
In any case, this may be the time to work up some partnerships with builders, as their sales begin to multiply and their need for appropriate financing becomes apparent. All in all, what we have here may be the best and most enduring news to reach us yet in 2015. It is probably also time to ramp up personal marketing efforts, so that lenders become more visible to potential borrowers as the need for assistance with financing grows.
And we may likely be seeing the healthy selling season this summer that many analysts had recently given up predicting. All in all, the news is remarkably good.