Year End Real Estate Thoughts...

As we enter December, we look back on a year that was. More than anything else, it was a year which indicated that we are returning to normal in the real estate market. How do I define normal?

The first word that comes to mind is "seasonal." For the first time since the start of the Great Recession in 2008, we saw housing inventories and closed sales more in line with the typical "end of school year" and "beginning of school year" seasonal spikes that we have been accustomed to over the past decades.

The second word that comes to mind, (actually the next two words) are: "Interest Rates." When a real estate market recovers, we have historically seen a rise in interest rates each and every time. While in most cases, the increase is a simple supply and demand type of response, this time around the feared rise in interest rates is more tied to global economic conditions and interactions than in earlier periods. During the 1978-1982 time period, a strict internal supply and demand situation tied largely to population growth caused housing, as well as just about every other segment of the consumer market, to experience rampant inflation. Economic leaders took bold steps to cool all markets... and cool they did by raising interest rates on housing loans to as much as 17%.

Will we see that same precipitous rise in rates again? There is little dispute that some type of increase is definitely in the cards for next year, however no one is predicting the double digit rates of the 80's. Instead, we will likely see small moves by the Fed possibly as early as the end of the first quarter of 2015. That said, with the lower rates, consumers are wise to recognize that a rise in rates from 4% to 5% represents a 25% increase in your interest rate...ouch! No time like the present to get moving.

Predictions for next year?  I see a very fast market early on in 2015 with inventory evaporating faster than it did in the spring of 2014. I would recommend that buyers move now to have set up a search profile to keep you abreast of offerings in our market. And for smart sellers, I'd advise to list now so you can sell your current home and also find a new one while market supply still allows you some very good selections. This is not a typical, programmed, "act now or lose it" recommendation. Those looking to lock in a new home with a great fixed mortgage rate are in a race with the Fed...a race you don't want to lose.