If you watch the evening news or read headlines from financial publications, then it’s easy to assume that everything is in the dumps. However, there’s one aspect of the economy – and an important aspect at that – that’s doing surprisingly well: the housing market. It’s been a while since we’ve seen a strong housing market, so you’re forgiven if you don’t remember the telltale signs.
Reasons for the Housing Market Surge
It’s been nearly a decade since net home sales have been this high, so why now? What events are driving this welcome growth – and is it sustainable? Well, for starters, here are a few of the contributing factors.
- Improving demand. In order for the housing market to hit on all cylinders, there obviously must be a demand for the supply. Well, contrary to what you may believe, job growth is steady, wages are slowly rising, and interest rates have improved. As a result, the housing demand is increasing.
- Confidence in new homes. One way to gauge the health of the housing market is to look at the number of new homes being built and the percentage of new home sales. From May 2015 to May 2016, there was an 8.7 percent increase in the sale of new homes.
- Possible interest rate hike. The rebound in the housing market is seen as a good thing for banks who’ve been beaten down over the past few months as a result of turmoil in the oil market. “And If the Federal Reserve raises interest rates sooner rather than later, as it is now indicating it might do,” CNN Money’s Paul La Monica points out, “that could also push some prospective homebuyers to act more quickly before mortgage rates climb too much.”
Nationally, these are some of the factors playing into the surging housing market. And the good news is that the foundation for this surge doesn’t appear to be as faulty as last time. All signs indicate that we could enjoy a healthy market for years to come.
The Dichotomy of Two Markets
One thing is quite clear, though. Not all individual housing markets are back to their pre-2008 levels. Generally speaking, cities and neighborhoods have something to prop up the market.
Take Lakewood, Washington as an example. The reason for Lakewood’s massive growth in the housing market over the past few months is largely due to the fact that this tight-knit community has it all. With 60,000 residents, roughly 3,200 businesses, and the stability of nearby Fort Lewis and McChord Joint Air Force Base on the southern border, this city is pretty stable.
The same can’t be said for an area like Atlantic City, New Jersey where the city is still reeling, median home values have plummeted, and income remains stagnant. For Q1 2016, the median home price was just $179,600 (down 13.6 percent). This goes to show that once major industries are pulled out from underneath a city – the casino industry in this case – the market can easily go by the wayside.
Surging Housing Market is Good News (For Most People)
The improving housing market is good news for just about everyone. Even struggling individual markets will eventually begin to feel the positive effects of the larger market. However, it’s true that first-time homebuyers in the lowest price tier are seeing more competition and rising prices. This is resulting in bidding wars on the lower end, while the upper end of the market remains quite stable.
If you’re in the market for a home – or considering putting yours on the market this year – then it’s wise to study up on your local market, while simultaneously considering the context of the larger national housing market.