The housing market is gearing up for a strong homebuying season this Spring, despite rising home prices, low inventory and the increasing chance of a rate hike.
Confidence for volume growth over the next 12 months increased 0.4% from the fourth quarter of 2016 to the first quarter of 2017, according to the Real Estate Sentiment Index from First American Financial Corp., a provider of title insurance, settlement services and risk solutions for real estate transactions. The index increased 0.63% from last year.
The RESI is based on a quarterly survey of independent title agents and other real estate professionals, providing a gauge on the real estate market using the crowd-sourced information and expertise of real estate experts.
“Overall, bullishness about transaction volumes in the coming year increased, largely driven by the rise in purchase transaction expectations,” First American Chief Economist Mark Fleming said. “Overall, year-end confidence in the healthy trajectory of the economy increased purchase transaction expectations, but the likelihood of higher mortgage rates further tempered refinance prospects.”
The increase comes from the 6.5% quarterly increase in confidence in purchase transaction volume growth. This is up 3.7% from last year. However, this increase was offset by the 5.7% quarterly decrease and 3.7% annual decrease in confidence in refinance transaction volume growth.
“The increase in overall transaction volume confidence this quarter suggests that title agents and real estate professionals feel the spring home buying season looks promising,” Fleming said. “However, the positive outlook for purchase transactions stands in contrast to a further decline in expectations for refinance transactions over the next 12 months.”
While the rising interest rates were enough to bring down confidence in refinance volume, it hasn’t discouraged first time buyers from entering the market. In fact, title and real estate professionals responded that rates would have to hit 5.4% before homebuyers would be discouraged from entering the market.
“Despite some regional disparities, title agents and real estate professionals do not expect increasing mortgage rates to have a significant impact on the housing market this spring,” Fleming said.
“Continued good economic news, increasing Millennial demand and confidence that buyers will remain in the market even if rates exceed 5 percent bode well for 2017 real estate,” he said. “Hopefully, there will be enough supply.”
And indeed consumers’ faith in the housing market is stronger than it’s ever been before, according to a newly released survey from Fannie Mae.
But First American isn’t the only company predicting a strong home buying season. CoreLogic’s report shows this Spring looks to be the strongest in recent memory.
The season will be so competitive, in fact, that many homebuyers may just need some Irish luck in order to land a contract on their dream home.
