When it comes to the residential real estate market, Lexington is similar to many communities across the nation. When the recession hit in 2008, home prices dropped, but not to the degree that they did in certain metro areas like Las Vegas or Phoenix. However, lower home values certainly kept many sellers on the sidelines. In 2008, and in the years that followed, a dramatic rise in foreclosures coupled with extremely tight lending standards made selling a home a difficult proposition.
Now, in 2013, dramatic changes bode well for sellers in the Lexington area. The glut of foreclosures has diminished to a trickle. Mortgage interest rates have risen a little, but they remain at levels not seen for decades. The prices of single family homes have been rising — sometimes at double-digit annual rates.
The Market Rebound
Standard & Poors established the Case-Schiller Index in 2000 to track existing single family home selling prices in the twenty largest metropolitan markets in the United States. Over the years, it has grown into one of the most reputable measures of residential real estate values available.
So, what does “Case-Schiller” tell us? In brief, the news is good for sellers. For example, in April of 2013, the year-over-year increase in home sales prices was in the double-digits at 12.1-percent. This was the largest annual increase in seven years.
Moreover, the monthly increase from February to March was a substantial 2.5%. That monthly increase was the largest reported by Case-Schiller at any time since the Index came into being in the year 2000. Perhaps this is even more significant because this strength in prices occurred before the arrival of the big spring-summer real estate sales season.
The Benefit of Record Low Interest Rates
The extremely low mortgage interest rates of the past year have fueled some of the price run-up. Buyers have been more willing to pay more for favored properties when the cost of borrowed funds is so low. Plus, those low rates have given buyers far more purchasing power. More buyers can afford your Lexington home now.
However, recently, rates for 30-year mortgages have risen from an average of 3.3-percent to 4.0-percent. This increase should not have much deterrent effect on buyers, but the effect is still significant.
For example, a typical buyer qualifying for a 3.3-percent mortgage had $12,000 more buying power than he/she does at 4.0-percent. For sellers, the message is clear — enjoy the supply of buyers while it lasts. If rates continue to rise, fewer buyers will qualify to purchase your home. That can mean fewer buyers competing to buy your home. In those circumstances, demand may soften, and residential real estate price increases may slow — which makes selling now a top priority.
Homes Selling Well For Now
Right now, however, it is a great market for sellers. Prices have risen enough to allow for real profits in many cases, and the supply of buyers has been good thanks to low interest rates. As a result, homes have been selling at a record level. For instance, in May, homes sold nationally at an annualized rate of $476,000. This is the best post-recession level ever. Homes were selling in May at a 2.1-percent better ace than in the previous month. The year-over-year increase in the number of homes sold has been eye-popping — 29-percent.
The sobering news for potential sellers lies in the sheer number of buyers happily moving into their newly purchased homes. The supply of buyers was inflated by pent-up demand created during the recession, and by record-low interest rates. The excellent supply of buyers is simply not sustainable.
Now Is The Time For Sellers
Therefore, potential sellers should realize that, right now, the perfect mix of buyer supply, low interest rates, and much higher home values exists. However, as the supply of buyers diminishes, values may soften. Also, as interest rates rise, the supply of qualified buyers will diminish as well.
The bottom line? If you’ve been waiting for years to get a fair price for your home, now is the time to list your property. See what your home is worth and read how you can get started in selling your home: