The number of single-family homes that went under contract in January 2012 jumped 14% over January of last year. The total of 458 deals that came together signals that the local real estate markets are off and running for 2012.
We have heard a number of theories as to why buyers are active so early in the year. One is that the lack of snow has everyone acting like it’s spring. Another line of thinking is that buyers who had their search derailed by the Halloween snow storm and subsequent power outage regrouped after New Year’s weekend and resumed their search. Finally others believe that the activity level is up due to favorable buying conditions. The truth is most likely a combination of these, and other, factors. But the end result is a quick start to the year.
There are a few main factors that play into the favorable buying conditions that we should note:
1. Mortgage rates are very low with 30-year fixed loans often having interest rates below 4%. The government announced that they plan to keep short-term rates at current levels for years, so it is possible mortgage rates may also remain quite low for an extended period.
2. Prices have fallen back to the levels of the early 2000s, making homes much more affordable than they were near the peak in 2006/2007.
3. Buyer confidence has increased to the point where people seem comfortable with the idea of either becoming homeowners or moving up to a larger property. This is partially a reflection of the local business environment where we see companies more inclined to hire workers than lay them off. There also appears to be more people relocating to the Hartford area for jobs than there has been over the past few years.
We’re expecting a busy spring real estate market in 2012 and already see activity picking up. Sellers should feel comfortable listing their homes at any point in the next few months, as buyers are already out there bidding. Buyers need to realize that they will have competition for the most desirable homes and plan their bidding strategies accordingly.