Real estate agents and brokers are girding for a spring housing market primed to be more competitive than eve, with fewer homes for sale compared with a year ago.
To compound matters, mortgage rates are on the rise after sitting at near-record lows for most of 2017.
According to a CNBC report, there are 10 percent fewer homes for sale compared with a year ago. In the hottest markets, where prices are appreciating fastest, there are up to 40 percent fewer homes for sale, according to Zillow.
Throughout 2017, low supply fueled an increase in home prices, which were rising already. That phenomenon is likely to continue as prices increase faster than incomes, even as the economy and employment continue a long trend of improvement.
The average rate on the popular 30-year fixed is up a quarter of a percentage point since the start of this year to around 4.25 percent, according to Mortgage News Daily. The expectation is that they will continue to move higher as the Federal Reserve raises rates and investors move away from the bond market.
For agents and brokers, the rising mortgage rates will make the market more competitive because they will decrease supply and increase demand.
Potential sellers will not want to lose the record-low rates they locked in after the recession, so they will stay put. Potential buyers will want to move in faster before rates rise even more and price them out.
While homebuilders have been increasing production, it hasn’t been enough to meet the growing demand.
Homebuilders have been increasing production slowly, but they are nowhere close to meeting the growing demand, according to Aaron Terrazas, senior economist at Zillow
“The market is starving for new homes, but it won’t be easy for builders struggling with high and rising land, labor and lumber costs. Aging millennials and young families may be able to find more affordable new homes for sale this year, but they’ll most likely be in further-flung suburbs with more grueling commutes to urban job centers.”
Moreover, newly built homes cost more than similar existing homes, so the increase in mortgage rates is likely to make them less attractive to some clients, particularly those on the fringe or who have had trouble qualifying for a mortgage.