Just how is the real estate market? Overall, 2013 proved to be a good year for an industry on the road to recovery.
At a Keller Williams conference this February, Gary Keller, Jay Papasan and members of the KW Research Team ran through the numbers that drive the U.S. and Canadian real estate markets, as well as the economic impact of the previous year with a focus on sales, price, mortgage rates and inventory – key indicators Keller believes are essential for interpreting the data in a meaningful way.
Their findings revealed several things, starting with the news that prices are on the upswing. The annual pace of home sales outperformed 2012 numbers for every month this year until December, and was the best year for homes sales since 2006. The last time the market performed like this was 2003. “This is the fifth best sales year in the history of sales,” said Keller.
The median home price at the end of 2013 was $197,100, up 11.5 percent from the previous year. In order to understand that number in a relevant way, Keller turned to annual home prices, which he said “gives us total the perspective.” Though home prices have been increasing year-over-year for 17 consecutive months, that number still sits below the long-term 4 percent trend line.
Translation? There’s still room to recover.
Mortgage rates continued to hover around 4 percent, which was up 30 basis points from 2012. Keller wasn’t shy about predicting a future rise in rates. “Don’t be surprised if you see rates go up to 7 percent in the next three to four years,” he said. “Let’s put it into perspective. I got into real estate during the highest interest rates ever. We were asking people to agree to 14 points on their mortgage and people still bought. Every market has their pros and cons, so don’t ever get locked into ‘is it a good time?’”
It’s always a good time to buy, especially when you look at affordability – one of Keller’s favorite stats. “No other market is more affordable right now than real estate,” he said. He easily illustrated the point with a simple comparison. “The cost of a home is over double what it was in 1989, yet the monthly payment is only up $116! Compare that to the increase in the price of gas, bread and a new car and it’s pretty amazing.” The challenge is helping people understand that he continued.