Will the sun shine on the housing market come spring?
With Groundhog Day fast approaching, America's favorite pint-sized meteorologist - Punxsutawney Phil - will soon emerge from his burrow to give the country his prediction: Will it be an early spring?
Don't get your hopes up too high. If history is any guide, it'll likely be another six weeks of winter. More often than not, Phil does see his shadow: 103 times since 1887, in fact, USA Today reported using National Oceanic and Atmospheric Association data.
That being said, there's still plenty to look forward to. In addition to the flowers blooming in spring, the housing market is expected to flourish as well - at least relatively speaking. Well, at least that's what the early signs suggest.
Home sales are down — for now
By most indications, such as those from the National Association of Realtors, buying activity decidedly cooled off down the stretch in 2018, with existing-home sales rising on a year-over-year basis just twice since the early summer.
With fewer people looking to move up or buy a house for the first time, builders have added time to develop residential properties. According to the National Association of Home Builders, a newly constructed single-family residence is move-in ready in approximately seven months.
Inventory is in slightly better shape
Housing supply remains below the ideal, with the number of unsold properties amounting to around 3.9 months, based on NAR's calculations. The optimal amount is approximately six months. However, conditions are better now than they were a year ago when total housing inventory in November equaled 1.74 million — up from 1.67 million at the same time a year earlier.
With more dwellings to choose from, home value increases should stay relatively nominal, although the housing market does have a certain degree of uncertainty due to the effects of local dynamics. Still, NAR Chief Economist Lawrence Yun doesn't foresee any major price or sales swings, speaking at the REALTORS Conference & Expo in Boston this past November.
"The forecast for home sales will be very boring - meaning stable," Yun noted at the time.
Mortgage rates should remain historically low
Something else to be encouraged about is mortgage rates. Due to the Federal Reserve raising short-term interest rates four times in 2018, many suspected mortgage rates would rise sharply. That's not expected in spring, or throughout the year for that matter, explained Sam Khater, vice president and chief economist of housing research at Freddie Mac.
"Generally, the monthly mortgage payment remains affordable for most buyers and that's good news," Khater said. "First-time buyers account for over 45 percent of purchases and their share hardly has been impacted by the run-up in mortgage rates in 2018, which I think illustrates that they are a stabilizing force to the market because their willingness to purchase is high."
Although 30-year fixed rate mortgages did, on average, rise in 2018, the uptick wasn't major. But even if rates were to increase, they remain quite low by historical standards.
Much like Punxsutawney Phil, the housing market is unpredictable. But one thing is for sure: Residential real estate is healthy overall and poised to improve further along with the economy.