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Health & Fitness

Luxury Homes Lead Strong Real Estate Market Into '14

The U.S. housing market remained strong to close out the year, according to data from the National Association of REALTORS® (NAR). Much of that strength was driven by the price segment above $500,000. And this price range is expected to power the market through much of 2014 as well. However, buyers in lower price points can still expect to benefit from the current combination of low mortgage rates and increasing loan program options.

One might wonder why the jumbo market is so significant today. The answer to this question may surprise you, because it was set in motion nearly 5 years ago. The housing market continues to benefit from the 2009-2010 federal home buyer tax credit. That particular stimulus program helped first-time buyers get into the market, which, in turn, freed existing homeowners to "move up". Today, move-up buyers dominate luxury price points in many U.S. markets, and account for more than half of December’s home resale numbers.

The second reason of strength in the luxury segment is low jumbo mortgage rates. In the summer of 2013, jumbo loans bucked the broader trend, when rates fell through August and September even as conventional mortgage rates climbed.

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The performance of the jumbo housing market is robust, but the U.S. housing remains strong across every price point. The pent-up demand of the last several years continues to enter the market and buyers still outnumber sellers. Just over 4.8 million homes sold in December 2013.  That’s a slight increase over the prior month, but still the second-lowest reading for the year.  Analysts expressed disappointment at December's Existing Home Sales figure, asserting that they should be higher in an improving housing economy.

But consider this: At the current pace of home sales nationwide, the current inventory of 1.8 million homes would sell out in 4.6 months, which is the fastest pace since March 2013. And, because supply is below 6 months, it points to a seller's market which means that today's buyers have little negotiation leverage. 

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This news should not discourage potential buyers. Buying in a market where fundamentals are sound, and velocity is high in relation to inventory, can make for a very good investment. If you would like to get qualified to purchase a home, or you still want to take advantage of today’s low rates to refinance your loan, email me at btoft@bayeq.com or call direct (425) 256-3158.

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