Nashville Real Estate: You Can't Afford to Wait to Buy
According to CNN Money, home buying has not been more affordable in more than 20 years. The National Association of Realtors states that they have never seen better housing affordability conditions or market opportunities than now, and they have been tracking affordability since 1970.
We are currently experiencing the perfect storm of home affordability due to extremely low interest rates, declining housing prices, reduced buying activity and a surplus of home inventory. Let’s explore each of these areas and see how they affect home affordability and how they combine to bring us the greatest buying opportunity of your lifetime. The links to the articles I have referenced will be noted at the bottom of this article.
Low interest rates may be the number one factor affecting home affordability. USA Today and Freddie Mac just reported that average mortgage interest rates in the US are at their lowest level on record. This is the lowest average rate since long-term mortgages began in the 1950’s. Low mortgage rates are key, because they drastically affect your purchasing power.
Shawn Kaplan, local mortgage expert, says that a 1% rise in mortgage rates equals a 10.75% loss in purchasing power. Imagine this scenario; you are pre-approved to buy a $400,000 home in an environment when mortgage rates are rising. When you finally find your dream home, rates have risen by 1%. You no longer qualify for a $400,000 home. Based on the latest interest rate, you would only qualify for a $357,000 home purchase. This will be the new reality for home buyers. Kiplinger expects mortgage interest rates to increase about 1% by the end of 2013.
The S&P/Case-Shiller Home Price index took a turn from annual declines to annual increases in April 2012 for most of the cities measured. It has been a long time since we have enjoyed broad based gains, even if they were modest at 1.3% for the year. We are currently at 2002 home price levels per the US composite index. The Core Logic Home Price Index is reporting a third consecutive, monthly increase in home prices with a 2% price gain from May 2011 to May 2012.
Kiplinger expects prices to be slightly positive for 2012 and up 3% for 2013. These price increases seem modest when compared to historical averages, but when combined with rising interest rates, they further erode the purchasing power of home buyers. Prices are expected to rebound more sharply in areas like Nashville, TN; where the economy is improving faster than the national average.
According to sales data generated by the Greater Nashville Association of Realtors, local home sales (compared to the previous year) began to increase in the fourth quarter of 2011 and have continued to climb each month. The latest data for June 2012 shows we are up more than 20% over June 2011. Year to date for 2012, we are up more than 24% over the same period last year.
GNAR data also indicates a continuing trend in inventory. All categories of real estate are showing decreases in inventory as compared to 2011 including residential homes, condominiums, Multi-Family homes and Farms/Land /Lots. We are currently at less than a six month supply of housing and are still declining. Total inventory is down 13% over last year.
This is of huge significance to the housing market and is a leading indicator of home prices. With most builders not yet up to speed and inventory decreasing, the simple laws of supply and demand will eventually take hold in the Nashville Market. With demand increasing and inventory falling, prices have only one way to go, UP!
There may not be a better time in your life to buy Real Estate. You need to act quickly before this opportunity disappears. Call your favorite Realtor Now and ask him to show you the great deals on the market today!
National Association of Realtors
Shawn Kaplan, Mortgage Expert
Greater Nashville Associtation of Realtors
Steve Jolly is a full-time Real Estate Broker with six years’ foreclosure experience in greater Nashville TN. He is a highly rated broker with many banks, lenders and asset management companies. Jolly averages almost 50 sales per year and is one of the top agents in the Metro Nashville. He used his vast sales, marketing and contracting experience to sell homes quickly at top dollar. His belief in the Golden Rule, his commitment to integrity and his proactive management style will help you succeed in real estate. His promise: “We treat your home like it was our own!”