The housing market is a fickle beast
First, let’s take a look at the home sales this year compared to last year in the months of Sept – December. According to the NAR (National Association of Realtors), the inventory of homes for sale has increased. Furthermore, the sales of existing homes has gone down during this time period. This wasn’t the case for 3 years in a row leading up to this period. In fact, the exact opposite was true: Inventory took a dip, while sales were drastically accelerating.
According to Lawrence Yun, NAR’s Chief Economist:
“This is the lowest existing home sales level since November 2015. A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”
Interest rates can be your best friend, or worst enemy
Interest rates are still historically low. However, time is of the essence if you’re looking to buy or refinance. We’ve seen the traditional 30 year fixed rate increase almost a full point this year. Fannie Mae, Freddie Mac, and the NAR are all in agreement that interest rates will continue to rise. The FED has been talking about rate increases for awhile now, and plan on continuing on that path.
Doug Duncan, Fannie Mae’s Chief Economist said:
“The rise in [mortgage] rates paired with this very strong price appreciation absolutely is slowing housing,”
Prices on starter homes have seen a much greater appreciation in value over higher end homes. In fact, it’s almost double. If we look at the past 5 years, entry level home have appreciated by 47%. Their higher end counterpart? – Only an increase of 24%.
According to the Institute of Luxury Home Market’s Luxury Market Report, the $1M-and-up price range is now experiencing a buyer’s market. This means that supply (inventory) has finally caught up with demand and buyers are in the driver’s seat when it comes to negotiations. Additionally, many listings in this price range have experienced price cuts in order to entice buyers to put in offers.
Let’s Wrap It Up
All the extra housing inventory coming to market will likely help normalize the market by allowing incomes to catch up to home prices. Interest rates are historically low, but will continue to rise in the short term. If you’d like more information on the local market conditions, please let me know!