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Optimistic Spring Market

With the coming of spring, so comes the busy buying and selling season in the housing market. The market is seeing developments across the country of low inventory and rising rates.


The Kiplinger Letter, an online source for business forecasts, shared a spring market trend report in which David Payne—Kiplinger’s staff economist—and Rodrigo Sermeno, reporter, told REALTORS® should be expecting low inventory and increased competition and a rise in interest rates.


The problem that has arisen is that there are not enough homes in heavily-populated areas, or in areas that are showing rapid growth.


“Buyers should expect tight inventory of existing homes across the nation, particularly in fast-growing metro areas such as Denver, Dallas, Seattle and Portland—but also most major metros in the West and in the South,” say Payne and Sermeño.


With buyers out in full-force and not enough houses to choose from, available homes are receiving aggressive bids past their price points.


“Buyers should expect more competition for entry-level homes, both existing and new,” Payne and Sermeño say. “Tight inventories of existing homes will likely lead to bidding wars in many markets.”


This is showing that the housing industry is in need of new construction, which is where the South is flourishing.


“The South is seeing strong growth in residential construction, including starter homes,” say Payne and Sermeño. “Builders are gradually adding entry-level homes in certain markets in the South, such as Dallas, Phoenix and Atlanta. Some builders are focusing on peripheral areas around these cities, where it is cheaper for them to build entry-level homes.”


According to the Kiplinger Letter, new construction growth is slow across the US but the South and West should expect new homes on the market later in the year.


“Builders will continue to gradually bring starter homes to the market, but the rising cost of labor and building materials will make it difficult,” Payne and Sermeño say.


While it is true that prices have been on the rise, growing home prices seem to be slowing down for the foreseeable future.


“Home price growth will slow a bit, to 5 percent from 6.5 percent last year,” say Payne and Sermeño. “Price appreciation has been strong for a while, and some areas are seeing demand hurt by affordability problems, especially for high-end homes; however, the slowdown this year will only be modest because of continuing lack of inventory, especially at the low-to-middle price ranges.”


The biggest concern for homebuyers are riding interest rates, which is contributing to the frenzy of home-buying activity this spring.

“The prospective rise in interest rates this year and next is actually boosting buyer demand to purchase before rates rise further, according to REALTOR® surveys,” Payne and Sermeño say. “Next year, once it appears that mortgage rates will be stabilizing, then the higher rates will have a somewhat depressive effect on prices and demand.”