It’s about that time: the time when real estate investors start to analyze and interpret spring housing market trends that are starting to become more apparent. After all, the spring homebuying season is typically one of the most active times of the year for homebuyers and investors alike. It’s worth noting, however, that not all spring housing market trends are created equal.
It’s entirely possible for some of today’s trends to be nothing more than flashes in the pan; they can come and go in the blink of an eye. On the other hand, there are those spring housing market trends that could shape how the rest of the year plays out; the ones that really pay to keep an ear to the ground on.
It happens every year: spring ushers in a trend that resonates in one way or another throughout the rest of the year. That said, it’s in your best interest as an investor to identify said trends and use them to your advantage. Let’s take a look at three of the spring housing market trends I believe to be the most prominent and what they mean for investors moving forward.
1. Prices will continue to rise at a slower pace
With the onset of the latest recession approximately a decade in the rearview mirror now, it’s safe to say the housing market has finally gained the traction it so desperately sought for years on end. Nearly every fundamental indicator is better off now than it was even just three years ago. Last year, for example, prices rose for the first 10 months. And if the first quarter of this year is a good indicator, there is no reason to believe the momentum hasn’t carried over. A recent Veros Real Estate Solutions forecast suggests homes could appreciate by as much as 3.5 percent over the next 12 months, and it’s very likely that spring will serve as the catalyst.
It’s worth noting, however, that at that rate, price appreciation rates will have tempered from the previous quarter. So while this spring should see homes continue to appreciate, expect them to do so at a slower pace for the foreseeable future.
According to Nela Richardson, chief economist at Redfin, Veros isn’t alone their my sentiment. “We believe price increases will hold steady despite slowing sales growth, because homebuyer demand is stronger now than it was at the same time last year, and because we foresee a small uptick in homes for sale,” said Richardson.
Investors looking to secure their next deal should heed this particular scenario as one of the most likely spring housing market trends to take place in the coming months. Consequently, now isn’t the best time to wait to buy a property. With prices expected to keep rising, it could certainly be in an investor’s best interest to jump on the next deal they come across. Those that wait could find themselves regretting the additional price increase that has become synonymous with the latter parts of spring.
2. Affordability could stifle buying activity in select cities
Again, the economy is certainly on more solid ground than it was even just a few short years ago. As a result, America’s biggest cities have become the beneficiary of growing wages. However, the share of affordable homes to someone earning the median income in those cities where wages are expected to increases looks as if it will remain stagnant. So while people are going to be making more, they may find the lack of affordable housing a significant obstacle to overcome. And while this development mirrors previous years, this spring could see the trend intensify.
“The irony of the modern housing market is that the places where we are seeing wage growth are places where people can’t live because they are too un-affordable. There is a mismatch,” says Richardson.
Savvy investors tapped into the spring housing market trends could really benefit from listening to what the market has to say. And in this case, the market is speaking loud and clear: there is significant demand for affordable housing. There is a large contingent of buyers in today’s greatest cities that are ready to pull the trigger on their first home — provided they are ever able to find it. That’s where you come in.
Perhaps it’s time for investors to temper their expectations of finding their first six-figure deal and focus their attention on more moderately priced housing. At the very least, paying special considerations to lower priced homes could pay huge dividends. In offering a lower price point, or at least targeting homes in cheaper areas, there is no reason to believe demand won’t be high. And what is demand if not for a great reason to pursue a deal in the first place?
3. Millennials will look to become more active than in recent years
Of the spring housing market trends we have grown to expect in recent history, none may be more trite than the growing growing interest of Millennial buyers. Ever since the recovery began, industry pundits and professionals alike have heralded the involvement of Millennial buyers as the final piece of the puzzle that will return the housing market to prominence. And while Millennials have certainly increased their role in the housing market, it’s safe to say we would like to see more. So it’s with tempered optimism that I suggest Millennial activity will be one of the most important spring housing market trends to keep an eye on this year.
Research provided by Zillow suggests that half of all buyers are under the age of 36, placing them firmly in the Millennial camp. There is no doubt about it: Millennials are expected to make up the largest pool of buyers this year, and spring is no exception. Investors that take careful notes could find themselves with a significant advantage at their disposal.
Millennials are now the largest adult generation and make up the greatest percentage of the workforce, which begs the question: What can investors glean from the proposed greater role of Millennial participation the housing market. As I alluded to before, most younger buyers will be on the lookout for starter homes, or those in lower price ranges. That means we could see more Millennials leaving coastal cities to move inland and take advantage of cheaper housing. Those investors that can identify the markets in which Millennials will be attracted to could benefit immensely.
Of the spring housing market trends expected to take place in the coming months, I am most intrigued buy the prospect of increasing Millennial activity. If predictions are true, and it looks like they are expected to be, investors that cater to the largest pool of potential buyers will tip the scale in their favor. If for nothing else, real estate is a numbers game. Those that can appeal to the largest group of buyers will find themselves at the forefront of what could be a very lucrative trend.
This year’s spring housing market trends could provide investors with some very valuable information. Those with a little foresight and the will to exercise a proactive investment strategy could find that not all spring housing market trends are created equal. Those I outlined above could place savvy investors on the inside track and give them an advantage over the course of what is expected to be a healthy spring housing market.