Home Prices Will Do This Over the Next Year
NEW YORK ( MainStreet) Most Americans (55%) think home prices will go up over the next 12 months, according to a new Bankrate.com report.
"It seems like Americans' love affair with real estate has returned," said Greg McBride, CFA, Bankrate.com's senior financial analyst. "But there are still some clear headwinds, including rising mortgage rates, stubbornly high unemployment and the relatively low U.S. household savings rate."
Twenty-seven percent say price will stay the same and just 9% forecast a decline. Upper-middle-income households, or those earning between $50,000 and $75,000 per year, are the most optimistic, since 65% expect prices to rise and just 6% expect prices to fall.
There is concern on the part of some prospective home buyers that prices may be running away from them, said McBride.
"The housing market is aiding the economic recovery," he said.
In July, Bankrate established that 23% of Americans believe real estate is the best way to invest money that is not needed for more than 10 years. That was the second-most common response, slightly behind cash.
Consumers need to be prepared for the extra expenses which are incurred when owning a home and need to have enough savings for any unexpected home repairs or emergencies.
"We are concerned that some people are putting too many eggs into the home ownership basket at the expense of saving for emergencies and retirement," McBride said. "People don't have enough saved to begin with. It impacts the ability to save going forward."
Consumers should not expect 30-year mortgage interest rates to drop back down into the 3% range, said Howard Levine, senior vice president of consumer and residential mortgage lending at Miami-based Sabadell United Bank.
"We don't believe that will happen so buyers should move forward with their purchases while interest rates are relatively low," he said.
Potential home owners should check their credit scores while they are searching for a house, said Tony Vitalle, senior vice president at Better Homes and Gardens Real Estate Atlantic Shores.
"Buyers need to get their ducks in order rather than be left behind in negotiations as banks have tightened their criteria," he said. "They should clean up any credit issues or potential problems and be ready to take advantage of this market before the deals evaporate."
Consumers should expect interest rates to rise, but inflation helps the economy, because spending will likely increase, said Hollis Greenlaw, CEO of United Development Funding, a Dallas area-based real estate investment firm.
"From a macro perspective, inflation is very healthy for the economy, particularly inflation in home prices," he said. "For most of Americas, the largest asset on the household balance sheet is the equity in their homes. When home prices are rising, then their household net worth is increasing. When their household net worth increases, people feel wealthier and their confidence grows and they spend money."