Multiple Reasons for Optimism in the Housing Market

Home builders nationwide have a reason to celebrate – it’s beginning to look a lot like a seller’s market once again in the current real estate market.  According to statistics, the monthly supply of homes ready to be purchased on the market has dropped below a 5 months supply.  The tightening of inventory will promote quick sales as well as an eventual increase in home prices as demand will soon outweigh supply.
Potential home buyers will be able to purchase these new homes for sale as well as existing homes for sale because of an easing of credit requirements and down payment requirements both for FHA and Freddie Mac and Fannie Mae loans.  Decisions are being made to introduce loan packages that will offer down payment assistance to home buyers as well.

Another huge factor in supply and demand is the dramatic increase in household formation which means that more people will be out looking to establish a residence whether it is in an apartment or buying a home.  Millennials that were unable to get a job “right out of college” have started to move out of roommate or parent / relative living arrangements because of the new availability of employment nationwide.  The percentage of Millennials looking to get their own place increased by 11% from November to March according to surveys.

Finally, even though housing starts have been stymied by the unusually brutal winter weather, housing sales as of February reported a 7.8% sales increase on a monthly basis for new home sales and a 1.2 sales increase on a monthly basis for previously owned homes.

Wall Street is reflecting this sentiment with the iShares Dow Jones U. S. Home Construction ETF (ITB) showing a new 7.5 year high which is a reflection of the averaging out of home pricing gains which were on a roller coaster ride as the economy recovered.  Investors are interested in housing shares once again as the real estate market is showing true signs of recovery.  Overall there are multiple reasons for optimism in the housing market

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