The text I received last month from a friend back home in North Carolina caught me off guard.
“I’m looking to buy a townhome,” wrote my 25-year-old friend, unexpectedly mulling a decision to make the leap from renting a two-bedroom apartment in Charlotte. “Is now a good time to buy?”
Since I assumed this job in December, it’s a question I discuss often with friends and folks within the industry. When we seem to get conflicting information every day, it can be hard to truly know how the market is doing — and, even more important, where it might be headed.
There are a few things we do know, however: It’s almost indisputable that, in the nation and region, the housing market at the moment is experiencing one of its best periods in recent history. In a conversation not long ago, local Realtor Mike McCann, of Berkshire Hathaway HomeServices Fox & Roach, told me the market is the strongest he's seen in his more than 30 years of work. Home prices are reaching nearly the same heights they did before the housing bubble burst. This time, however, it's happening much more naturally.
Yet just because home prices are rising today doesn't mean they will be rising next month, next year, or two years from now. Online and in classrooms, questions over the future of the market abound: Are we in the midst of a housing bubble? And could that ultimately lead to another real estate recession?
Let’s try to evaluate.
Ever since 2012, national home prices have been steadily climbing, rising at an estimated 5.5 percent a year for the last 2½ years, according to the S&P CoreLogic Case-Shiller National Home Price Index. In January, the chairman of the index committee, David Blitzer, said things were going so well he declared that the housing market had completely recovered from the housing crisis.
The recovery, Blitzer argued, has been driven by multiple economic factors: Interest rates are at historic lows, and unemployment has been falling. Wages, too, Blitzer said, have been steadily increasing.
All this has propelled the index to near-record highs — driven largely by markets including Seattle, Portland and Denver, which have seen increases around 11 percent. Yet even so, national and local experts have begun predicting that this price acceleration can’t sustain itself.
"Home prices," Blitzer said last year, "cannot rise faster than income and inflation indefinitely."
So what does all that mean for the typical home buyer?
Part of the reason experts believe home prices will begin to decelerate is an expected increase in mortgage rates, as well as a potential increase in housing supply. If you're a buyer in the market, that combination can be a bit of a mixed bag.
Because of the anticipated bump in interest rates, buying sooner rather than later can be a smart move. Already, mortgage rates have increased about 0.5 percent since October — rising from 3.5 percent then to just under 4 percent now, and adding a few hundred dollars a year to a borrower's monthly costs. That said, it should be noted that mortgage rates are still at near-historic lows. And they aren't expected to rise all that dramatically through the rest of the year.
At the same time, a potential increase in supply could soften prices — both of which would bode well for the prospective buyer.
So, considering all this, it can be a pretty good time to buy, experts say. But, they warned, that's only if you're buying for the long term.
"If you plan on buying and then selling in five years, I would not buy," McCann told me. "At some point, there will be a downturn.
"When the market is good, people never see that it will change," McCann continued. "But every five to seven years, traditionally, we have a bit of a market correction."
According to economists and market observers, there are some signs that can help predict trouble ahead. Real estate entrepreneur Teo Nicolais says a combination of increased vacancies, declining occupancy, and rising interest rates can indicate a potential crash. Today, we're not there yet.
Instead, McCann said, shoppers should buy now if they plan to hold on to the property for the long term — especially in Philadelphia, where it's currently better to buy than it is to rent.
"I would buy if I want to keep the property for the rest of my life," McCann said. "Rates are low; there will be expansion in the marketplace for at least the next year."
"This is an unbelievable time," he said. "But if you're going to sell it in three years — forget about it."