There is a phenomenon happening here in Seattle that is likely being repeated around the country. The median price of a home sold is about 10% BELOW what the median income in the region would predict.
I believe this clearly shows the general population is holding back on buying. In my mind this means normal market forces (or pent up demand) will have a significant impact on the lowest priced homes in the area. As buyers grow weary of recession fatigue and start to move forward, the lower priced homes will be the first to see a surge in price. I don’t believe this will cause the price point for the higher priced homes to follow. Why? Many of the homes available to first time home buyers are foreclosures or short sales, meaning the sellers are not using proceeds to buy a larger or more expensive home. The residential housing market is a bottom up game and until the lower priced inventory is absorbed, the rest of the market will drift along.
What does this mean for the first time homebuyer? It could mean that those who get in now, in front of a possible surge could be the first ones out and buying into the “move up” housing market before it too starts to surge.
Is this a lock? No. But the sweet spot is here and who knows how long it will last. It rarely hurts to take advantage of the sweet spot.
For the record, I am routinely quoting loans with Note rates below 5% that qualify for a lender credit at this time. That too is a sweet spot.