Active Housing Market keeps persuading buyers and now sellers.
The last 5 years of the real estate market has been a wild ride to say the least. In 2010, first time home buyers increased dramatically over the norm due to the large tax credit given out by the federal government. That triggered the highest number of first time buyers ever. While this group accounted for half of the homes purchased in 2010, the other key players were the international (cash) investors who were purchasing the rock-bottom-priced inventory. This same group of investors and first time home buyers were the main consumers of real estate through 2012. By this time, the excess inventory had been purchased one way or another.
In 2013, values of homes were finally catching up and or exceeding the mortgage pay off(s). Finally sellers and their listings began trickling into the market. This segment of the housing market was previously stagnant and was on the side lines for many years. Finally they can list and sell their homes for a value that exceeded the mortgage, or at least minimally met the mortgage value, depending on when they actually bought their homes. It was a hot year. Sellers, buyers and builders were moving along. There was so much pent up demand for real estate, homes and people had frugal fatigue.
In 2014 during the second year of the housing recovery… there was a shift. Only 33% of home purchases were made by first time buyers, which was a near record low. So now let’s look at factors and trends that have been helping to reshape the market here locally in Tampa Bay as well as nationally in 2015.
If you have been reading SI Real Estate Tampa’s blog this year, you have seen the extremely positive news and supporting statistics reflecting an exceptionally active housing market. Many factors have contributed to this explosion. Interest rates at historic lows, rising rent costs, move-up buyers, and of course rising home values.
One of the largest factors in this market shift (that cannot be overstated enough) is the extremely attractive interest rates on mortgages. Interest rates remain irresistible to close out 2015, yes even with the quarter point increase recently! Everyone knows this is coming to an end very soon (projected 1 point rate increase in 2016), so there is a huge sense of urgency to buy now while the rates are still at historic lows. Brian Teyssier, a realtor in Pittsburgh, echoed this same sentiment “the increased rental fees coupled with low interest rates and the fact FHA lowered their down payments- it’s a no brainer for those people that were renting to move their (five year) plan up.” Our real estate team here in Tampa could not agree more.
Another dominant reason to purchase right now is rising rent cost. At a certain point, it no longer makes financial sense to rent. We reached that point early on this year and that trend is being echoed in most major metropolitan areas. So long as you can qualify for a mortgage, the buy option is simply a much better choice at this point and cannot be ignored. It now costs more to rent than to own your home! It has actually been a hot topic when talking with our buyers. No reason to pay $1600-$2000 in rent every month when you can own the same property for a mortgage that is less than rent! According to Zillow, “home values will increase by 2.5% at the conclusion of 2015, but rentals will outpace that figure, increasing 3.5%.” As we are wrapping up the year, that estimation in our local Tampa market seems to be incredibly conservative!
In addition to the first two factors, there are also an abundance of move up buyers who are now ready to list and sell their existing homes. They are then seeking an upgraded and/or larger home for their growing families. Most were not able to do this before now because their homes were worth less than what they owed the bank. Additionally, baby boomers are downsizing and enjoying a simpler life now that the kids have their own lives and places to live. Everyone is back in the housing market!
The last factor in the housing market resurgence we want to address is a hugely overlooked segment of the population, millennials. Who said millennials are not interested in buying homes!? Not so! The housing market has been seeing an increase in buyer activity from the millennial age group. Millennials (ages 18-33) are usually an overlooked segment of the housing market due to the recession hitting this group particularly hard. The overwhelming majority of millennials have not been able to get to the home buying phase of their lives. A few of the factors that caused this road block: rising rent costs, increased student loan debts, decreased post college job opportunities and flat wage growth.
These obstacles were improved for millennials in late 2014 noting a 60% better job growth compared to the overall US and unemployment dropping to 6%. This led to an increasing amount of 18-33 year olds looking for homes to buy. Realtor.com’s housing forecast for 2015 included a prediction that “millennials were more likely to buy a home in 2015 than any other” generation. We do not have the final numbers for 2015 yet, but we suspect realtor.com may have been right. No doubt this helped the turnaround we have been watching take place this year.
With the economy, job wages, and labor market all going in positive directions… it is easy to see why the housing market is so attractive. More buyers, sellers and builders than we have seen in a long, long time! Confidence in the housing market, confidence in income, and confidence in the economy are leading to record numbers of houses sold this year, seemingly almost every month! We fully expect 2016 to keep the momentum robust. Stay tuned to SI Real Estate Tampa Bay for the latest updates!