The days are getting longer. But the surest sign that summer is here are those “For Sale” signs popping up in a fairway around the neighborhoods.
Summer is the most popular time of the year to buy and sell a home. And for those thinking of starting a home search, the first instinct might be to stay away and wait for the weather—and the market—to cool down. Why battle the crowds and bidding wars if there’s no rush to move?
There’s no reason to dread buying a home in the summer. In fact, there are some distinct advantages to entering the marketplace during housing’s hottest season – as long as you can stand the heat of a little competition.
The housing market, like most things, is influenced by cyclical changes. It’s affected by the job market, financial markets, interest rates, and the local economy. But there are also seasonal shifts that have an impact on the house buying process, including the price paid for a new home.
Because summer is the most popular time for house-hunting, prices and competition are high. Home buyers won’t have the same decision-making time as they did in spring, fall, or winter. When they see something they love, they better be prepared to move or it may get snapped up by someone else.
Summer is the most popular time to move, so moving companies charge the highest rates. When house buyers must move in summertime, they should aim for mid-month, as the beginning and end of the month (when leases expire) are the busiest.
With lush grass and blooming flowers, most properties look their best in summer. Neighbors are out and about, and it’s easy to get a sense of the community as a whole. And kids are out of school. Buying a house and moving in the summer is a much easier transition if you have a family.
What to Expect in This Summer’s Real Estate Market
Specifically, the 2018 summer isn’t going to give home buyers much of a break. Myrtle Beach and the Grand Strand is still a seller’s market. Sellers will stay in the driver’s seat as buyers continue to face affordability issues thanks to low housing supply. “The challenges for buyers in the Myrtle Beach market haven’t changed that much from last year or, for that matter, last quarter” says Jeremy Jenks, vice president of sales at The Trembley Group Real Estate.
What’s more, home loans are expected to get more expensive as the year progresses.
Here’s what home buyers and sellers can expect from the housing market this summer…
Homes Will Remain in Tight Supply
The supply of housing still won’t be able to keep up with demand this year, experts predict. And the homes that do hit the market will sell fast.
A balanced housing market tends to have about six months of supply, according to Jeremy Jenks. In December, the market had less than three months of supply, and homes were selling five days faster than the year before.
Jenks expects 3% more sales this year compared to 2017. But competition will be fierce.
“First-time buyers are going to have to juggle a lot of balls,” he said. “As long as we have an inventory shortage we will have bidding wars.”
The good news is that home building is expected to increase 10% this year, according to Lawrence Yun, chief economist for the National Association of Realtors, to reach around 1.3 million new single-family homes. But that’s still not enough to keep up with population growth and job creation.
Builders had been focusing on the more profitable luxury market during the housing recovery. But Jenks expects them to shift down-market.“”They have been shifting toward more middle-market and starter homes,” he said. “Rather than the 3,500-square-foot home, the focus has been more to the lower cost.”
Home Prices Will Slow
Home prices have risen exponentially in many Grand Strand housing markets – especially those with thriving job markets. Values in Myrtle Beach and the Grand Strand will to continue to rise – but at a slower pace. “Prices can’t go up at the same pace they have been in the Myrtle Beach market forever,” said Jenks. “Because of the difficultly in affordability, sales will slow in those marketplaces.”
Jenks is expecting a 6% increase in home prices at most this year while Yun predicts a more temperate 2% gain.
It’s an unusual spring market given the growing purchasing power of home buyers in low to mid-market prices. It’s the lack of housing (few want to sell) combined with tough mortgage rules that are frustrating buyers. First time buyers are looking for a savior and wondering it’s a good time to buy anyway.
Despite prices, homes are selling. And more are being built. How much prices will rise, depends on where you live and where you want to buy. Trulia reports housing inventory has grown 3.3% yet starter homes have dropped to their lowest levels since 2012. What is available is expensive.
Housing inventory then remains the most influential and persistent factor affecting home prices. Despite this, the media and some politicians blame speculation, building costs, interest rates, cost of living, and mortgage rules. When the economy is good people want homes. Construction is strong but can’t keep up. Simple rule of supply vs demand is driving home prices.
Loans Will Get More Expensive
Home loans are expected to get more expensive as the year progresses this summer. After sitting below 4% for much of 2017, mortgage rates are expected to rise – a little.
“This will be the year mortgage rates make some measurable increases,” said Jenks. “That’s nothing too alarming, but it could hover around mid-four percent until year end, and that will tame some of the home-buying enthusiasm.”
Mortgages crossed the 4% threshold early in 2018. And according to Freddie Mac’s weekly survey released in mid-April, rates for home loans surged on strong economic data, taking the benchmark rate to its highest point so far this year.
The 30-year fixed-rate mortgage averaged 4.47%, five basis points higher than the previous week, and the highest for the popular mortgage product since January 2014. The 15-year fixed-rate mortgage averaged 3.94%, up from 3.87%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.67%, up from 3.61% last week.
Those rates don’t include fees associated with obtaining mortgage loans.
Mortgage rates generally follow the path of the 10-year U.S. Treasury note yield, which has started to recover after being battered by trade war fears a few weeks ago.
Stronger economic data and hints of firmer inflation have eroded the value of fixed-income assets and have weighed heavily on bond prices. Bond prices move inversely (the opposite direction) to yields. At the same time, investors are also warming to stocks rather than bonds after a batch of strong corporate earnings results.
Concerns about rising rates don’t seem to be dampening buyer enthusiasm. Data from the Mortgage Bankers Association shows that applications for purchase mortgages have been higher in every week of 2018 than last year. For the year to date, applications have been, on average, 5.9% higher than in 2017, even though the 30-year fixed-rate mortgage has been, on average, 19 basis points higher during that time.
“Mortgage rates are a little higher but still at historic lows. We’re a long way from the 18% rates in my lifetime when a mortgage rate was the same as a Visa or Master Card rate. I recommend my clients be as prepared as they can,” says Jenks. “They need to get their credit as high as it can be, get their loan paperwork in order and easy to get to.”
At The Trembley Group, we pride ourselves on being the experts at more than just selling real estate. We are local residents, some of us have been here for a lifetime. The rest of us will be here until the end of time. We love living, working, and playing in the diverse backyard of Coastal Carolina, and look forward to helping you live and love your dreams soon too. Please reach out to us by phone or email for personalized service and one-on-one advice.