Factors Contributing to a Better Housing Market

As mentioned in a previous blog this week, home sales in 2012 proved to be the best year in the real estate market since 2007. Statistics show that full year sales are up just over 9 percent from 2011, December sales were up almost 13% and interest rates are remaining low. The stimulation will continue as the following contributing factors remain stable.

Interest rates. They averaged 3.38% for a standard 30-year-fixed rate mortgage for the week ended Jan. 17. Average interest rates for 30-year-fixed loans have been below 4% for the past 14 months, Freddie Mac data show.

The low rates, along with home prices that fell more than 30% from their 2006 peak, has vastly improved housing affordability.

Job growth. The unemployment rate stood at 7.8% in December, down from its peak of 10% in the fall of 2010. A better job market is enabling more people to move out on their own, which is driving housing demand. Net household formations topped 1 million in each of the past two years, Sonders says. That’s more than twice the level of 2009 and 2010. (LA Times)

Falling supply. The supply of homes for sale in December fell to 4.4 months, based on December’s sales pace, the NAR says. That’s the lowest level since May 2005. Supplies are dwindling in the face of rising demand, fewer foreclosures and reluctant sellers.