October housing market reports tell us that November is a great time to enter the housing market, whether you are buying or selling.
Why is this a good time to buy? Because housing market experts are predicting a strong winter and an even stronger 2016. Buying now gets you into a new home before housing prices and mortgage rates rise even higher.
- The NAR, National Association of Realtors, reports that foot traffic numbers are up dramatically from last year.
- CoreLogic predicts a 1.7 net change in household formations (number of new households formed) by the end of 2015. New households are mostly older children moving out of their parents’ homes having spent the last few years saving for a deposit.
- The number of first-time home buyers increased to 51.4%, which is lower than historic norms but up from last month, which indicates room for growth. More than half of mortgages closed in September were for first-time home buyers.
Why are there so many new households forming and so many first-time home buyers entering the market? Despite news reports stating the opposite, millennials don’t want to continue to rent.
- They recognize that a mortgage would cost them less than renting.
- They want to invest rather than giving their money away to a landlord.
- Their incomes are increasing.
- They recognize that interest rates are good now but are rising and want to get into the housing market before they rise further.
- Their rents are increasing.
- They see favorable home prices.
We expect more new home buyers to enter the market as they recognize that the barriers to entry are not as big an obstacle as they believe. For example:
- Many believe that they need a FICO score of 780 to 800. However, a score of 714 is the average for approved mortgages for the first half of 2015.
- While many expect they would need a down payment of 20%, the average is only 7.1%.
- The debt-to-income ratio is currently at 36%.
Why is this a good time to sell? Because there is a shortage of inventory and demand is continuing to rise.
- During an inventory shortage, buyers are competing for homes and are more likely to pay closer to list prices.
- Market time also decreases during a shortage. For most states during 2015, houses were on the market for less than 60 days, many for less than 30 days.
What does the news from October tell us about planning for housing changes this November? If you’ve been considering entering the housing market, now is the time!
We’re watching the market for you and will be sure you have all the information you need to make wise decisions for you and your family.