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Summer housing trends: Will home sellers still have the upper hand?

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What's up with housing in summer?
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What's up with housing in summer? © iStock

What's up with housing in summer?

Activity in the housing market has been heating up just in time for the summer season.

The number of single-family home sales is rising and more first-time homebuyers are making their way into the market, according to data from the National Association of Realtors, or NAR.

"We're seeing more activity in general and we think that's a function of the improving job market," says Lynn Fisher, vice president of research and economics for the Mortgage Bankers Association.

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Unfortunately, builders can't keep up with the demand.

"The major problem facing housing now is the shortage of inventory," says Lynn Reaser, chief economist at Point Loma Nazarene University in San Diego.

Read on for five other housing trends to watch in the next few months.

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Mortgage rates may trend upward

Mortgage rates may trend upward © iStock

The Federal Reserve is expected to begin gradually raising the near-zero federal funds rate this year. That move will affect mortgage rates.

"I think they'll incline slightly toward the end of the year," says David Crowe, chief economist and senior vice president for the National Association of Home Builders. He predicts an increase of about 10 basis points, or one-tenth of a percentage point.

In the first half of 2015, the 30-year fixed-rate mortgage averaged 3.92%, according to Bankrate's weekly survey of interest rates. Fisher thinks the 30-year fixed-rate mortgage will reach 4.5% by year's end.

"They're going to be a little bit volatile, so there are going to be up-and-down movements as we go," she says.

This rise in rates will prompt potential buyers to take action, Reaser says.

"For the near term, this prospect of higher interest rates down the road may spur some pickup in homebuying, as individuals who have been sitting on the fence finally jump into the market," she says.


Home prices may trend higher, too

Home prices may trend higher, too © iStock

The national median existing-home price was $228,700 in May 2015, a 7.9% increase from May 2014, according to NAR data.

Home prices are expected to keep rising, likely more in some regions than in others, Reaser says.

We will see around a 6% price increase this summer compared with last summer, based on the Standard & Poor's/Case-Shiller home-price index, adds NAHB's Crowe.

"It's about the same trend that we have seen so far this year."

Median home prices increased the most in the West (10.2%) and the least in the Northeast (4.8%) from May 2014 to May 2015, NAR reports.


It's still a seller's market

It's still a seller's market © iStock

Although summer could be considered a good time to buy a home, we're in a seller's market, experts say.

"The inventory of existing homes is relatively low," Crowe says, "so the buyers don't have a lot of choices."

Builders are starting to increase their inventories, however, so there's a bit more buying power in new homes, he adds.

The market could get a purchasing boost this summer as well.

"Housing should see a lot of sales as people try to move in before the school season begins and are trying to avoid the increase in interest rates," Reaser says.


More first-time buyers enter

More first-time buyers enter © iStock

The improving housing outlook is encouraging first-time homebuyers to make a comeback.

The number of first-timers in the market increased from 27% in May 2014 to 32% in May 2015, according to an NAR report.

First-time buyers "have been participating, but at a very low share of the total housing market," Crowe says, "and there are signs that they are beginning to return in greater volume."

In a separate survey, the Campbell/Inside Mortgage Finance HousingPulse found that first-time buyers made up nearly 40% of May 2015 home purchases.

Mortgage insurance premiums for Federal Housing Administration loans have been reduced and lenders are introducing mortgages with lower down payment requirements, so we should see even more newbie homeowners this summer, says Lawrence Yun, chief economist and vice president of research for NAR.


Simpler documents on the horizon

Simpler documents on the horizon © iStock

The Consumer Financial Protection Bureau, or CFPB, has combined four complicated forms that borrowers receive -- two when they apply for a mortgage and another two before they close on a home -- into two simplified documents. The changes are a provision of the "Know Before You Owe" rule.

The original plan was to require lenders to start using the new loan estimate and closing disclosure forms Aug. 1, but the CFPB recently proposed an amendment to delay the effective date until Oct. 3 because of an administrative error.

Mortgage industry groups collectively let out a sigh of relief.

"August is a heavy closing month, so if there was disruption it would have been quite sizable," Yun says.

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5 housing trends heating up this summer Getting ready to buy a home? More first-time homebuyers are entering the market. Is there any good news?
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