Many real estate professionals may be dealing with would-be buyers who are concerned about the impact of rising prices. However, lower rates provide strong long-term savings even as other costs grow higher. With this in mind, it's vital for agents to highlight to their clients just how good the deals currently available in the market are in comparison with historical norms, and encourage them to make a purchase as soon as they can.
The reason buying a home in the near future may be so vital to today's shoppers is neither current rates nor prices are expected to last much longer. Indeed, the latest data from S&P CoreLogic's Case-Shiller National Home Price Index shows home prices are now regularly hitting all-time highs, with the most recent reading showing home prices rose 5.8 percent on a year-over-year basis in June, and that rate of increase grew from the 5.7 percent observed in the previous month.
The other aspects of affordability
Meanwhile, there are other aspects of what goes into the cost of a home that could be a net positive for buyers today, according to First American's latest Real House Price Index. In June - the latest month for which data was available - the overall cost of buying a home was up 9.3 percent year over year, but still down 34.8 percent from the same month in 2006, just before the onset of the market's downturn.
Mortgage rates remain extremely low in comparison with historical and pre-recession norms, for example, and median household incomes continue to rise, meaning that while homes may be getting more expensive, those higher prices are also easier for the average buyer to afford.
Put it together
The conditions in today's market create an obvious value proposition for would-be buyers: Rates are low, but they're not likely to stay that way for much longer, especially with the Federal Reserve Board's Federal Open Markets Committee expected to vote for another basis rate increase before the end of the year. And while home prices are certainly on the rise, similar increases in purchasing power from today's buyers mute those effects overall, according to First American chief economist Marc Fleming.
That issue may not last, though, because as David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, points out, the national inventory of homes for sale continues to tighten, and builders can't put up houses fast enough to meet the feverish demand now observed in many markets.
To that end, the more agents can do to encourage their clients to stick with their dreams of home ownership, rather than being discouraged by the bidding wars that have become so common, the better off those clients are likely to be long-term. With rates and prices both expected to rise over the next several months, locking in a deal in the near future could help those clients save tens of thousands of dollars in comparison with what they would face if they wait for the start of 2018 to start the real estate sales process.
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