Housing 'Window of Opportunity' May Be Closing

July 9, 2008

COLUMBIA, SC – JULY 8, 2008 — With near-record low interest rates, competitive prices and a large selection of homes to choose from, the current market strongly favors new home buyers. But economic conditions indicate that consumers who are sitting on the fence hoping to get a better deal probably shouldn’t wait any longer, according to the Home Builders Association of Greater Columbia.

“Changes in interest rates, cost of building materials and inventory of unsold homes will have an impact on the buyer’s market,” said George Delk, president of the Home Builders Association. “Buyers who take advantage of today’s optimum conditions can get more home than they could just a few years ago, but it’s not going to last forever.”

Interest rates, although lower than they were a year ago, have started to move up. Rates on 30-year Freddie Mac fixed-rate conforming loans are ½ percent higher than they were three months ago in April. And Business Week’s senior editor and senior economist James Cooper recently wrote that, “On June 11, the futures market was betting heavily on at least one increase in the Fed’s target rate in the second half of the year.”

What it costs to build a new home is likely to increase as well, which builders will have to reflect in their prices. According to Bernard Markstein, senior economist for the National Association of Home Builders (NAHB), “Higher energy prices and industrial expansion in the rest of the world are continuing to put additional upward pressure on construction material prices.  Already, prices for building materials for single-family new construction, which were rising by about 2.5 percent until a few months ago, increased 4.7 percent from May 2007 to May 2008.”

Finally, builders today are offering attractive incentives to sell surplus inventory. But they are also adjusting their production in the slowdown, so when the homes currently on the market are sold, there won’t be as many to choose from for the next couple of years. And builders won’t be as inclined to make deals.

Homeowners and buyers in the midlands have seen their investments continue to grow in value through the first quarter of 2008. The latest report issued by the Office of Federal Housing Enterprise Oversight places Columbia, South Carolina at number 24 in the nation in increases in home prices. The one-year appreciation figure of 5.3% is better than 92% of the 292 metropolitan markets surveyed. South Carolina ranks number 11 in the Housing Price Index of the 50 states. Much has been made of a decline in housing prices caused by a slowdown in Florida, California, Nevada and Arizona, states that have a disproportionate impact on national figures, but the southeast has demonstrated its economic strength by posting some of the nation’s most encouraging housing statistics.

“Owning a home remains the best way for families to grow their wealth over the long term, and a fixed-rate mortgage protects you against increases in rent that could come with inflation,” said Delk. “New homes also provide great energy-efficiency that will benefit the family for years to come.  Ultimately, a purchase of a home is an investment in your family and your community.”