What’s Influencing a Stall in the Housing Recovery?

What’s Influencing a Stall in the Housing Recovery?
Posted by RE-Insider on 10/04/13 • Categorized as Industry News

Over the past twelve months, the housing market has been booming with a much anticipated recovery. This rebound was fueled by many factors falling in line at the right time; low prices and low interest rates combined with a small supply of houses available, ultimately prompting many investors and buyers to enter the market resulting creating bidding wars which began to drive prices up.

Now, prices are higher than we’ve seen in years, and mortgage rates have been moving up as well. This has lowered affordability, and the market is starting to cool down because of it, leading to many concerns over a short-term stall.

While it is still hard to tell what the final impact of the recent cooling will be, there are a few key factors playing a role in the market’s cooling and recovery which should be watched.

One factor which should be noted is how quickly affordability has decreased. Prices have moved up at unbelievable rates since a year ago, and now that mortgage rates are increasing, many buyers are being deterred to enter the market. New home orders rose only by 1% in August from the year before, major decline from the 11% increase in July.

Lack of available housing is also having an impact on the recovery. While demand plays a large role in both the amount and price of houses sold, the lack of available housing is still holding back many buyers. Listings were up by 20% in August from the start of the year, but this is still far below the already depressed levels of one year ago.

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