After a tumultuous several years in the real estate world, the American housing market is on the up and up overall. According to a recent report by Zillow, the American housing market is favoring the seller as it continues to reform from the late 2000s chaos. Over the past year, median home values have risen 5.1% to $188,100. Zillow predicts that 2017 will see continued rises here, albeit at a slower pace of 2.7%. This is good news for homeowners patiently waiting to recoup their equity.
What’s more exciting here is a related piece of data: according to the US Census Bureau, incomes have risen at a rate of 5.2% over the last year. This marks the first time since 2011 that incomes have appreciated faster than home values, which is great news for buyers looking to break into the housing fray. Coupled with the predicted slow in appreciation of home values in 2017, it’s starting to look better and better for the buyer’s side of the national real estate market.
Let’s apply these figures on a local scale. Here in Missouri, the median home value is $135,200 as of the end of September, according to data from Housing Predictor. This is a 4.9% increase over the same period in 2015, falling in step with the nation’s average. Moving forward, however, is where Missouri starts to differentiate itself – median home values are predicted to continue to rise at a rate of 3.2% in 2017, which bodes well for homeowners considering their options for potential sales. Further, the state’s foreclosure rate has plummeted at a rate of 25% between now and the same period in 2015.
Less foreclosure means that a seller no longer has to compete with a bank for buyers – therefore allowing for higher closings, and thus higher equity for the seller. On the other side of the coin, as Missourians enjoy an increase in median incomes, they’ll also start to take advantage of the still-historically low interest rates on mortgages. Further, the rate of increase in home values has been slightly lower in Missouri than nationwide, which means that the increases in income will go even further than before. Though it isn’t quite a buyer’s market yet, Missouri buyers are finally at least in a competitive place in terms of market leverage.
An important thing to keep an eye on going forward is the way that the cost of renting continues to influence the market’s restructuring. According to Apartment List’s Rentonomics report, the nationwide average rental price increased 2% over the past year. Ralph McLaughlin of Trulia, speaking to USNews.com, pegged the trend of lower-end homes being bought up by investors during the foreclosure crisis to be turned into rental units as one of the lingering after-effects of the recession holding inventory and sale rates back. According to Trulia’s own rent vs. buy calculator, the cost of renting is eclipsing that of buying – in Kansas City, in fact, it’s 48% cheaper on average to buy. As more and more first-time homebuyers reach the financial capability to invest in their own mortgage rather than continuing to pay a landlord, we’ll start to see the buyer’s side of the market gain some real steam.