Millennials Are Buying
We have had a decent recovery for the real estate market over the past decade. The recovery has been slow, but steady. While slow and steady may be frustrating for some, it is actually a good thing when you compare it to the real estate boom of 2001 to 2005, which created a housing “bubble” because of rapidly escalating housing prices. A steady increase is more sustainable in the long run.
However, there is no doubt that the market recovery is being held back by a listing shortage, especially in the lower price ranges. The Millennials are coming of age and are ready to buy. However, the Baby Boomers are working longer than ever and are not quite ready to give up their homes. If a Baby Boomer has not paid off their home as of yet, they are likely to have exceptionally low interest rates through refinancing and thus living in their home is typically cheaper than renting. The question is–how will this “stalemate” be broken?
The answer is — gradually. Builders continue to slowly increase their production and this new inventory is sorely needed in most areas of the country. Again, a slow increase is more orderly than a building boom, even though we are not building enough to satisfy present demand. And the Baby Boomers will gradually retire and have to leave their properties as they age. Some of these homes will be handed down to heirs and others will hit the markets. In the long run, the listing shortage will be resolved. In the short run, purchasing a home in the lower-to-moderate price ranges is a very competitive game for those entering the market for the first time.
The Weekly Market Update
Rates were up slightly last week, as the markets reacted mildly to the jobs data. For the week ending May 11, Freddie Mac announced that 30-year fixed rates rose to 4.05% from 4.02% the week before. The average for 15-year loans increased slightly to 3.29%, and the average for five-year adjustables moved up one tick to 3.14%. A year ago, 30-year fixed rates averaged 3.57%.
Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield jumped 8 basis points this week, while the rate on 30-year fixed loans rose 3 basis points to 4.05%. Mixed economic reports over the last few weeks have anchored the 30-year rate around the four percent mark."
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.