I'm getting a lot of questions about the local real estate market. Are home prices going to continue to go up? Will mortgage rates go up this year? Should I buy now or wait? Should sell now or wait?
All of these are great questions. So let me give you my predictions for the rest of this year. We'll see how I did in December.
1) Home Prices:
Home prices have sky rocketed in the last few months from the steady increase over the past couple of years. The average home cost, in Fort Worth 2 years ago was $178,000 now it's $227,000. That's almost $50,000 more to buy the same house!
This price increase has created 2 market functions.
One, It's caused an extreme shortage of homes under $200,000 because we have a big group of houses move out of that price range up into the next level.
Two, Millennials are coming into the market to buy their first home and they are qualified for homes $150,000- $250,000 but there are very few to buy in that price range. So as home values have moved up, buyers are qualifying for the same. We are not only fighting shortage but affordability as well. Also another factor is a herd of investors are now in the market to buy entry level homes for rentals. They are paying cash and pushing out the first buyers in many cases
This is happening in the middle section of the market as well. Supply is higher but affordability is going down and this increases as you go up in price until you get to luxury homes. Rich people still have money and a 10% or 20% increase in home price does not effect their purchase like it does for the rest of us.
With that being said. I think home prices will continue to rise but at a much slower pace. We are currently selling homes for more than construction cost by 10% to 40% and that's kind of scary. Affordability is at an all time low. If the economy catches fire and we all get a 20% raise then affordability will come back up a bit but until then the luxury market will do fine, it's the "Chunky Middle" that I'm worried about.
2) Will Mortgage Rates go up this year?
Yes they will. I think we'll see rates got up to or at 5% by years end. Thats still a great rate so it will have little effect on the market. The difference of a FHA loan at 4% and a FHA loan at 5% is $88/month on a $150,000 home. Again affordability or what you can qualify for will have a much bigger effect.
3) Should You Buy Now Or Wait?
Duh! Unless you believe the general direction of the market is down. I wouldn't step in front of that train.
4) Should You Sell Now Or Wait?
It depends on your situation. Are you downsizing? Then generally yes. Are you upsizing? Then generally no. Are you relocating? Then yes. Are you considering leasing the property instead of selling? Bad idea, not only from a market standpoint but from a tax standpoint as well. Should I sell now and rent for awhile until the market comes down? Again Bad idea. You should always buy and sell on the same market. It very easy to whipsawed in moving market.
If you any questions I have not addressed here or have a different opinion please let me know.