Market forecasters continue to predict that 2014 will be another year of gains for the residential real estate market – even though the brisk pace of sales that saw home prices rise an average of 13.6 percent last year cooled as the polar vortex besieged the northern half of the country.
In fact, the spring home buying season is off to a stronger start than at this time last year, with modest price increases and a spike in inventory, according to the recently released realtor.com® National Housing Trend Report for March.
The number of properties for sale on realtor.com in March rose 9.5 percent above March 2013 to 1,841,844 units, with the current median list price of $199,900 up 5.3 percent over March of last year. The biggest change however, is the fact that the median age of inventory increased 22.9 percent above last year’s figures, to 102 days on the market.
The data suggest that the market is more balanced than it was in 2013, when a shortfall in available supply led to double-digit price increases in many markets. Having more homes on the market may mean more affordable prices for first-time and move-up buyers. In contrast, realtor.com reported that a lack of inventory in 2013 led to intense competition, creating another barrier to homeownership.
Here in Northwest Indiana, it’s easy to see how builder activity is picking up to provide buyers with more options. Just take a drive through some of the thriving new home communities in Cedar Lake, Crown Point, St. John, Valparaiso and the surrounding areas to see what’s new.
It’s a definite indication that there are buyers out in the market.
In fact, as soon as a local builder gets started on a spec home (a new home that has not been presold), it usually doesn’t take long for a number of buyers to be attracted by the benefits of a ready-to-move new construction home, which is also an indication that, overall, inventory remains a bit low in some locations and at some price points.
“Inventory is still low here, and buyers are limited on their choices for a new home,” India Castaneda of Coldwell Banker Residential Brokerage in Highland said. “If they have seen all the homes that meet their criteria and haven't offered on one, they are just waiting for new listings to hit the market place.”
The latest reports from the Greater Northwest Indiana Association of REALTORS® indicate that while the number of new listings is generally on the rise, it’s still not enough to keep up with buyer demand – and we saw how low inventory created a very competitive environment starting just about this same time last year.
In fact, throughout the busy spring and summer months, buyers were disappointed to learn that their offers – many of which have been at or near asking price – were not enough to win over sellers who held the advantage in multiple offer situations.
“There’s definitely a bit of frenzy building up out there again,” Herm Hoge, broker/owner along with his wife Kris of RE/MAX Realty Associates in Munster, said. “We have 35 professional agents in this office who go to work in real estate every day. They were able to remain busy during the market downturn, and we had an especially good year last year. What we’re seeing right now is a return in consumer confidence. People are coming into the office with the attitude that ‘I want to do this and get it done now.’ People know interest rates will not stay this low forever, and they want to make a move.”
“In the moderate price range - $125-$225,000 - things are selling very well in the Munster and Highland market,” Castaneda added. “We are seeing multiple offers, offers over the list price and very short days on market. If the home is in good condition, clean and priced right - there is a pool of buyers waiting to jump on it. With the harsh winter we have sellers who are just now getting their homes listed instead of late February or early March when we usually see a big push. Preparing your home to sell is key too. It must be decluttered and clean. Buyers want move-in ready homes.”
Hoge agrees whole-heartedly.
“There’s no doubt that houses still need to be priced right relative to their condition,” Hoge explained. “A lot of buyers in the market today are looking for a home that’s turnkey, so staging and undertaking a few strategic upgrades can be important for sellers looking to get top dollar. Illinois buyers are certainly driving our market right now. Moving to Northwest Indiana offers a number of advantages. – affordability with significantly lower real estate taxes, a better quality of life and great schools.”
While Northwest Indiana homeowners prepare their properties and get them listed on the market this spring, buyers are keeping a close on interest rates, which Fannie Mae, Freddie Mac, the National Association of Realtors (NAR) and the Mortgage Bankers Association (MBA) have all projected will increase resulting in higher mortgage payments by the second quarter of next year if not sooner.
In their annual Real Estate issue, Money Magazine reports that the average interest rate on a 30-year fixed loan is predicted to climb from the current 4.4 percent to 5.3 percent by the 2015 spring buying season. For a $250,000 loan, that means that a borrower who waits would pay $136 more per month and an additional $49,090 in interest over the life of the loan. When you factor in the projected increase in prices over the next year, see table for a look at the difference between moving now or later.