The best way to describe the current market seems to be “just enough”. Both the economy and market values are rising just enough to bring just enough sellers into the market to satisfy just enough of the buyer demand to keep the market moving and prices rising.
There is a significant shortage of available homes for sale. We are at a low point for listing inventories as we come off a high point for sales, creating a depleted inventory going into the fall and winter. This is good news for Sellers with upward pricing pressure through the winter months (which is a rarity). For many Sellers, the spread between what is owed and current values is still wider than they would like. This means there is a chance the sales rate could slow through the winter simply because there are not enough homes to sell. We could see a strange phenomenon of the sales rate falling (compared to last winter, but still a good pace) while prices rise.
As the market recovers, it is interesting to note that most of the issues holding back a real explosion in real estate have been artificially created, as are many of the key factors fueling the recovery.
On the stimulus side:
- The Federal Reserve buying Bonds (Quantitative easing) helps keep mortgage rates at record lows
- Government entities, Fannie Mae, Freddie Mac and Gennie Mae (FHA) are the funding source for nearly 90% of all mortgages
- Government refinance and short sale programs are helping reduce the foreclosure overhang
On the holding back demand side:
- The concern over the potential lender restrictions under the Dodd-Frank act has banks holding back on lending
- Government law suits against banks to buy back old loans have caused many to stop mortgage lending all together, restricting available credit
- Uncertainty about what will be the underwriting standards imposed on lenders going forward causes lenders to be more cautious
- Congressional inaction on extending the Rural Lending programs have reduced access to credit for many rural markets
Combined, they seem to cancel each other out, allowing for a steady real estate recovery. Both Presidential candidates are unclear as to how they will address any of these artificial issues, so we will have to wait until next year to get a clear direction. In the meantime, Buyers keep pushing to buy and Sellers are gaining more confidence, regardless of which way the political winds blow.