With the real estate market heating up, many homeowners are waiting for home values to increase before putting their homes up for sale. Yet never has playing the waiting game on home price appreciation represented a more significant financial gamble than it does right now.
Shadow Inventory
It’s rolling the dice against the threat of a shadow inventory of distressed properties like foreclosures and short sales being released for sale at prices below market value in the near future. Because we can reasonably predict this continued occurrence through Notice of Default filings at recorder’s offices, this distressed inventory poses a significant threat to keep comparable home prices down. In fact, it has been the steady sale of distressed properties that has kept prices from appreciating substantially despite recently tremendous buyer demand.
Low Inventory Means Less Competition
Also, the fact that there are currently an overwhelming number of buyers actively looking to purchase a historically low number of homes for sale frequently creates buyer bidding wars that generate purchase prices above market value and other contractual terms that are favorable to sellers. But again, this buying frenzy could easily be subdued if this anticipated wave of distressed property once again saturates the market or if interest rates increase as expected.
Interest Rates Will Increase
Current mortgage interest rates are hovering at some of the lowest levels in history. Over the past few years the U.S. Federal Government has spent trillions of dollars to keep mortgage rates artificially low in order to boost the housing sector. Now that we are witnessing an identifiable real estate recovery and the general population becomes more concerned about the growing U.S. national debt, the likelihood that more U.S. dollars will be spent to keep rates this low is slim.
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