The answer to this question is of key importance to many of those looking to sell their homes. Although the future cannot be predicted, we can look at the data to tell us how things are shaping up for the year to come.
Let’s start with the big picture. After five years of decline, the median price of a home in Maywood has been consistently rising since January 2013.
In fact, since 2013 the price of a home in Maywood has increased from $34,450 in December 2012, to over $75,000 as of December 2015. Moreover, the price of the average home in Maywood has increased by over 50 percent in 2015.
So, what’s behind the improvement in prices? Are there more buyers looking for a home? Are there less homes for sale? The answer isn’t as simple as you would think. Let’s take a look at some of the factors that have led to where we are today.
Supply is down. Way down
Supplies of new homes are at their lowest point since 2007.
Why the decline you ask? A couple reasons.
Foreclosures have been in decline since 2013 and have reached a seven-year low
Since 2008, banks have provided the lions share of the inventory available to home-buyers, but that trend has started to change. Banks have steadily declined.
Homes that have been foreclosed, repossessed and sold as is are typically in poor condition and need substantial reinvestment.
Due to poor condition, mortgage options are very limited for home-buyers. This typically means that most successful transactions go to cash investor buyers, who comprise a smaller segment of the market than home-buyers.
This reduction in demand and the corresponding increase in the supply of homes available puts downward pressure on home values.
The number of traditional sales (private party, with no bank involvement) has been in decline since 2008
Sellers who don’t need to sell, don’t when the market is down.
As value has been lost, more sellers choose not to sell their homes at a low price. The sellers will likely continue to choose to stay in their homes until prices improve significantly. Once prices improve, these entrenched sellers will likely choose to sell and, slowly, inventories will rise.
Demand has (almost) returned to pre-crash levels
Higher rents and continued low interest rates are creating a strong incentive for consumers to a purchase home vs. continuing to rent.
Rehabbers have continued to fix foreclosed homes and resell them in peak condition to “first time” and “recovering” home-buyers.
The availability of down-payment assistance programs has lowered the amount of cash that a home-buyer needs for a down-payment; in many cases to as little as $1,000. This assistance creates more incentive to purchase vs. rent.
So, what’s going to happen in 2016?
The forecast is for the improvement in prices to continue and likely at a brisk pace. The leading indicator of price direction is Months Supply.
Months Supply is simply the amount of time that it takes for all the homes in a market to be absorbed by all the potential buyers in the market.
Months Supply peaked at at high of 19.3 months in March 2010. It’s currently at 4.7 months as of December 2015, which is the lowest point in the past seven years.
This graph shows that the Months Supply of homes in Maywood is quickly approaching seller’s market conditions.
Wayne Beals is a top-producing Chicagoland realtor, who has been engaged in all facets of the real estate industry in Chicago and the surrounding suburbs for the past 12 years.
The views and opinions expressed in this column are those of the author and do not necessarily reflect the positions of The Village Free Press.