The fact that buyer demand remains strong as more homes come on the market from a combination of existing stock and new housing starts are all strong indicators that both buyers and sellers are continuing to respond to the extreme affordability low mortgage interest rates provide for them to make their move this spring and summer.
The number of homes offered for sale rose by 4% in April from March, but was still down by 13.5% from last year’s level, according to data compiled by Realtor.com. Inventories typically rise in the spring as the home-sales season gets into high gear.
Half the homes listed for sale in April had been on the market for at least 81 days. That’s down by 2.4% from March and down by 11% from one year ago, evidence that homes are spending less time on the market.
Moving forward, there’s even greater optimism about the real estate market thanks to increasing home values. Asking prices rose by 2.6% in April and were 3.1% above last year’s levels.
With demographic evidence pointing to the continued formation of new households for the foreseeable future, and the fact that homeownership remains a strong goal of every generation from aging Baby Boomers to newly independent Millennials, there’s definitely a greater sense of urgency in the market today.
As more people who were on the fence waiting to see what was going to happen with the economy now saying it’s a good time to sell, and builders ramping up new home construction, buyers will have more choices as we head into summer. However, with housing now contributing to the overall economic recovery, don’t expect the very best opportunities to be available for very long. Priced right, properties are selling very quickly to the highest bidder.
With home prices on the rise and the Dow hitting all-time highs, the wealth effect
- when consumers spend more as stocks and the value of their homes climb, even if they don’t plan to cash out on those investments any time soon - is slowly returning to our economy.
Prior to the recession, economists estimated that for every one dollar gain in stock market wealth, consumers spent about three cents more over a two-year period. Rising home prices were thought to pack even more bang for their buck, with each dollar increase leading to about eight cents more in spending.
If those relationships were to hold true, the wealth effect alone could add one full percentage point to GDP growth this year, according to Deutsche Bank's chief U.S. economist Joe LaVorgna. Confident that stock prices and home values will keep rising, he believes people will spend more and save less over time, and that the wealth effect can once again be as strong as it has always been.
Houisng contributes to the economy in two main ways. Directly, the contribution comes from home construction and improvement. Indirectly, it drives consumer spending. The wealth effect is most demonstrated when borrowers tap into their home equity for everything from vacations and college tuition to home renovations and dinners out.
Credit Suisse economists Neal Soss and Henry Mo studied how the wealth effect has shrunk since the 2007-08 financial crisis, specifically how the housing wealth effect appears to be less potent right now than the stock market wealth effect.
According to Soss and Mo, housing wealth has been much more volatile since home prices went down in 2006. Prices ticked up in 2009 and early 2010 amid several rounds of homebuyer tax credits, only to slide until hitting bottom about a year ago,
Plus, today’s gains in home prices are following a period in which home prices declined by 30 percent on a national basis (that number is less than 20% locally).
Finally, even as more homeowners have equity, lenders can make it difficult for them to withdraw it.
Their conclusion - volatile wealth isn’t as valuable as more stable wealth, and the potential stimulus from housing-wealth-related consumption could be substantial in the medium-term.
Pillars of the Community: Habitat for Humanity of Northwest Indiana recently announced a new wheelchair ramp-building program, in partnership with Catholic Charities and Prompt Ambulance Service.
Known as “A Brush With Kindness,” the program was first introduced by Habitat for Humanity International, as part of the nonprofit’s broader community development strategy in 1999, in partnership with Valspar Corp. serving communities in the greater Minneapolis, MN area. The program has since expanded nationwide, with Habitat for Humanity of Northwest Indiana the newest affiliate providing service to qualified residents.
“A Brush With Kindness allows us to better achieve Habitat’s mission by expanding our qualified partner-family base and offering those in need the opportunity to regain their independence,” program coordinator Kristin Marlow-Kellemen said. “Habitat for Humanity will be able to serve more families and have a greater impact on the overall community improvement and neighborhood revitalization needs that exist right here in Northwest Indiana.”
Contact Marlow-Kellemen at 219.923.7265 or firstname.lastname@example.org for more information.
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