Jonathan Smoke, Chief Economist at realtor.com, gave an optimistic outlook for the real estate market at a recent conference. He noted that over half of annual home sales occur between May and August, calling the current period the "Summer of Love" due to low interest rates hovering in the mid-3% range. While low rates have led to many homeowners refinancing, young buyers have still been able to purchase homes. However, high demand and low inventory have driven prices up in many markets, though Smoke does not believe this indicates a new housing bubble.

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Economist forecasts bright future
L
astmonth,realtor.com’sChief
Economist Jonathan Smoke
got a chance to talk about
the nation’s housing market after
serving as the key-note speaker
during the inaugural REALTOR®
Communication Directors Summit
in Miami. His message offered a
bright outlook for REALTORS® as
well as their buyers and sellers.
Smoke emphasized that the
summer months highlight the
real estate market’s buying sea-
son, noting more than half of all
annual sales occur between May
and August. Smoke referred to
the current warm months as the
“Summer of Love,” largely due to
low interest rates, hovering in the
mid 3s. In fact, Smoke wondered
aloud if interest rates would drop
below 3 percent at any point in the
coming months or year.
The historically low interest
rates have brought on a myriad
of results. The first is a barrage of
home owners looking to refinance.
Given the relative low risk in
home refinances, banks prioritize
those over new mortgages. The
result is, the higher the risk on
a mortgage application, the fur-
ther down the priority list it gets
pushed. Still, Smoke said young
potential homeowners have not
missed out on the opportunity to
buy a home. He added that won’t
happen in growing numbers until
Realtor.com’s Jonathan
Smoke outlines variety
of factors in current
real estate market
interest rates begin to eclipse the
5 percent mark.
Smoke stressed there is no
widespread affordability prob-
lem, but rather that obstacles are
found more around accessibility.
He cited saving money for a down
payment as the largest hurdle
new homebuyers face.
However, while credit remains
tight, there are positive effects on
the economy. Smoke said the mort-
gages written over the past six
years are among the most rock sol-
id in history. That fact, combined
with a lack of construction in new
home building, in an era with an
inventory shortage, means there
is a little chance of another hous-
ing bubble that would leave many
cities littered with distressed prop-
erties. He said access to credit will
increase as interest rates rise.
The economist elaborated on
the inventory shortage that is
impacting many markets nation-
wide. Inventory is less than three
months deep in many markets, in-
cluding both Reno and Las Vegas.
Real estate officials say a one-year
supply is normal and preferred.
Smoke said the figure of average
days on market in many regions is
the lowest it’s been in a decade.
As the housing market bounces
back from its crash of nearly a de-
cade ago, the median sales price
and number of sales has risen
consistently in recent years. How-
ever, he added the current state of
affairs cannot continue.
“At some point, the market will
hit a wall,” he said. “You can’t
keep growing sales numbers and
see a low inventory. We’ve got a
complex report coming out in July
to address the question, ‘Are we in
a bubble.’ The answer is no.”
New home builders are working to address an inventory shortage but also
taking a conservative approach, ensuring not to outpace demand.