Today’s summer forecast is hot and getting hotter depending on where you live. No, we’re not talking about the weather. We’re talking about the real estate market in general and the rental market in particular. Here’s what’s driving real estate market trends and that steamy outlook.
Low Interest Rates
Despite the recent spike, mortgage interest rates are still historically low, hovering near 4%. Some recent actions of the Federal Reserve have spooked the markets, but it appears to be taking action to reverse that uncertainty. Don’t expect to see interest rates soar significantly, so the market will continue to sizzle.
Demand Exceeding Supply
Certain laws can’t be repealed and one at the top of the list is the law of supply and demand. With rates so low, inventory of homes for sale is at historic lows, as well. According to a recent Fox News report, there are only two million homes for sale nationwide – about a five-month supply. Six months is considered normal. Last year at this time, there was almost a six and a half month supply. In some of the hotter markets, there is less than three months supply. According to data from Realtor.com, the hottest markets include Oakland, San Francisco, Seattle, and Phoenix.
As prices continue to rise, you can expect to see an increase in inventory, but by how much is still in question.
So what happens when demand exceeds supply? Prices go up and buyers get creative. Houses are being scooped up even before they hit the listings. Buyers are employing guerilla tactics using referrals, personal contacts, and even going door to door to get a chance to bid on houses potentially for sale. This is causing bidding wars that are spiking sale prices. This behavior is particularly prevalent in markets on the west coast and in some eastern cities.
Rental Market Catching Fire
The torrid housing market isn’t the only thing on fire. The rental market is heating up as well. A recent report from AOL Real Estate says the top ten rental markets in reverse order are Houston, Atlanta, Los Angeles, Chicago, Raleigh, N. C., Orlando, San Antonio, Charlotte, N.C., Austin, and Las Vegas. As demand grows, rents are rising as well. In some areas like Portland, Oregon, rental rates are spiking as much as 30%.
One thing is clear. In the current climate, home sellers and property owners have the upper hand. No one knows for sure where the market is heading, but for the time being there doesn’t appear to be a cold front in sight.