Over the past few months, there have been many positive trends taking place in housing markets across the country, indicating that a housing recovery is underway. Those who have been looking at new homes for sale recently have probably been seeing a steady increase in home prices. The National Association of Home Builders (NAHB) featured a publication by the Wall Street Journal which cited five main factors that have contributed to home prices rising on a national level:
Rise in housing affordability: Now that long-term mortgage rates have reached and maintained record lows, there has been an increase in housing affordability which has drawn out more home buyers looking for new homes for sale, especially in areas like Fenwick Island, Delaware. Lower mortgage rates have enabled on-the-fence buyers to be able to purchase into beautiful new beach home communities like Bayside, which offers a range of prices starting at the $290’s.
Increase of new households: Data by Bank of America Merrill Lynch showed an average of 570,000, for household formation over the past 5 years. For this year, the number of new households formed in the U.S. is expected to reach 1 million.
Rise in rents: With rent prices rising across the country, more prospective buyers are beginning to realize that in many housing markets, it is actually more cost-effectve to buy a new home rather than rent one. In August, a real estate listing website, Zillow, analyzed over 200 metro areas and found that in more than 75% of them, new home buyers would actually reach a “break even” point in three years or less if they were to buy a home instead of rent.
Decline in foreclosures & distressed sales: Compared to the past few years, the year of 2012 has seen a significant decrease in both foreclosures and distressed home sales, which have fallen from their peaks in most markets and have helped to alleviate the downward pressure on home prices in various areas.
Lower housing inventory levels: Inventory levels have reached a low in the U.S. that has not been seen in nearly 5 decades. This has led to a higher demand for new homes for sale, which has contributed to prices being driven up higher. The housing industry has seen a sense of urgency amongst new home buyers, who are wanting to purchase into new home communities while mortgage rates remain low, and before home prices rise any higher.