The housing market has made so many strides in the past few years due in large part to low prices and rates combining to create sky-high affordability that many experts see gains in the future being somewhat predictable. However, this may not be the case, thanks to the many irregularities that separate the current recovery from those seen in the past.
The housing market’s recovery is likely to continue for some time, but anyone who is expecting to see predictable changes in the next several months or more may be in for a bit of a surprise, Bank of America Merrill Lynch Global Research senior economist Michelle Meyer told Yahoo Finance.
“This is not a normal housing market,” Meyer said. “This is not a normal housing recovery.”
The reason for this is that conditions in the market now, and in the past, have never been configured in quite this way. For instance, interest rates may have spiked appreciably in the last month or so, but even despite those increases, the levels seen now are still well below both historical norms and the ones that are applied to the vast majority of homeowners’ existing mortgages.
Even still, the higher rates of the past few weeks seem to have deterred some prospective buyers from actually purchasing new homes, the report said. However, that trend is not likely to last long due to the fact that there is still near-record affordability available to most consumers.
“The speed by which interest rates have increased is a little bit concerning for short-term housing fundamentals,” Meyer told the site. “It will likely create a bit of a shock factor for some people who were kind of on the fence to buy and were pricing out a home based off of a lower rate environment.”
In addition, with demand still somewhat high and a smaller number of distressed properties now being scooped up by consumers and investors alike, it may be that prices will continue to grow considerably, though perhaps not at the levels observed in the last year or more, the report said. Meyer noted she believes that prices at the end of this year will be somewhere between 8 and 10 percent higher than they were at the end of 2012.
It’s believed that rising home prices will also bring more sellers into the market and free some of the pent-up demand that exists because of the current constrained inventory. That, in turn, might reduce buyer frustration with the market that has been shown to exist currently.