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Your home: What’s behind the early hot housing market? 2 factors
By Chad Taylor
Question: Why is the housing market “heating up” so early this year?
Boy, this could be a very long answer. However, I am going to stick to two main contributing factors: low inventory and affordability.
Low inventory, in this case, means a lesser number of homes for sale than there are buyers looking to purchase. This is exactly what many homeowners have been waiting for for six years now. It appears we have gone from a buyer’s market (high inventory) straight to a seller’s market (low inventory).
Please know that each subdivision or area of town can be its own micro-market. Thus, one area of town might be in a slight seller’s market while another might be in an extreme seller’s market with almost no inventory available. You might ask, “What constitutes low inventory?” For me, it would be anytime you have less than three months of inventory. An example: Let’s say four bedroom Cape Cods in Prairie Village are selling at a rate of two per month and there are currently six for sale. If nothing else comes on the market, then in three months they would all be sold.
For the month of January, most of northeast Johnson County had between five and six months of inventory available. And that inventory is dropping. Inventory in the KC metro is down 22 percent from January 2012.
Onto the next factor: affordability. Affordability is my favorite topic right now. I find that the more friends and clients I talk to about it, the more I realize I need to do a better job of getting the message out to them that houses have almost never been more affordable.
At the end of 2012, it took only 12.9 percent of the median family income to cover the median family house payment. That is in large part due to historically low interest rates coupled with lower home prices. As a reference point, in 2005 (just eight years ago), that number was 23.2 percent. Almost double what it is today. From 1970 to today, the long-term average has been 21.6 percent.
So what does this mean to you? Have you ever heard the term “house poor?” That is when you have a great new home to live in, yet no money to improve it or do anything else fun like vacations, dining out, gifts for those that you care about, etc … In the early 80s when it took more than 36 percent of your income to pay your mortgage, it was very easy to be “house poor.” So comparatively speaking, with affordability at 12.9 percent, our clients are finding that they have more funds available for home improvement projects and to have a fun life as well.
This weekly sponsored column is written by Chad Taylor of the Taylor-Made Team and Keller Williams Realty Key Partners, LLC. The Taylor-Made Team consistently performs in the top 3 percent of Realtors in the Heartland MLS. Please submit follow-up questions in the comments section or via email. You can find out more about the Taylor-Made Team on its website. And always feel free to call at 913-825-7540.
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