Housing Market Forecast and Trends - Attention Home Buyers

© 2009, Brandon Cornett. All rights reserved.

Is now a good time to buy a house? This is one of the most common questions we receive from first-time home buyers. Typically, we refrain from giving specific advice on this subject, because it’s up to the individual to make such life-changing decisions. Generally speaking, however, the current housing market forecast shows a lot of positive signs.

So if I were a first-time buyer — and I was on the fence about whether or not to take the plunge — I would get moving sooner rather than later. Here’s why.

• Mortgage rates are rising, and they will continue to rise for the rest of 2009. Sure, there will be little hills and valleys on the trend line. But the general trend is moving upward. Buying later means you’ll probably pay a higher interest rate on your mortgage loan.
• Housing starts (new construction) were up 17% percent last month, which is a bigger gain than most economists were predicting. This signals rising confidence within the construction industry, which typically coincides with housing market recovery in general. This will also fuel the continued rise of mortgage rates.
• Building permits, which indicate future construction, are another key component of housing market forecast trends. Last month, permits rose by 4%, which was also better than economists were predicting.
• The first-time home buyer tax credit is currently set to expire in December of 2009. I predict that it will not be extended beyond that date. So if you buy a home between now and the end of this year, you could recoup up to $8,000 of the cost.
• You can’t talk about housing market forecasts without discussing the “floor” or bottom of the market. Many cities have already hit bottom and are starting to see slow appreciation. Home prices in other cities are still falling, but at a much slower rate (which signals a bottom in the near future). According to one U.S. economist, Paul Dales: “The bottom line is that housing activity appears to have found a floor, albeit at a low level.” This is another positive sign for buyers who are on the fence.
• High inventory (largely a result of the foreclosure crisis) will prevent home prices from rising for a while, but not forever. As the housing surplus starts to decrease, prices will rise. It’s simple supply and demand — a key aspect of housing market forecast and analysis. Wait until 2010 to buy that house you’ve got your eye on, and you might pay more money for it.

I’m a cautious person, and I don’t have a crystal ball. So I’m not one to jump onto a soapbox and shout that the worst is behind is. But anyone with a sense of economic history can put the pieces of the puzzle together. The housing market is showing several classic signs that normally signal a recovery period. So first-time home buyers who are on the fence might want to consider getting off it — and soon.