What's happening in the market?
Our local market is still busy, and we’re often asked how the rise in interest rates has impacted sales and inventory. So far, we’re still fielding multiple offers on homes that are priced in accordance with comparable sales. We also still feel a strong sense of urgency from buyers to find the right home with dwindling inventory and the holiday season around the corner.
As we look to national market trends, we often listen to one voice, the National Association of Realtors Chief Economist Lawrence Yun, who seems to really have his finger on the pulse of the real estate industry.
In a recent article, Yun recently opined, “slower growth in home prices, decelerating inflation, and multiple interest rate hikes by the Federal Reserve could contribute to a more normal housing market in the new year.” He goes on to describe that while we are witnessing a decline in home sales and home building, we have not seen a recession in home prices. Yun states that “inventory remains tight, and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.”
While we’ve seen sellers enjoy the drastic appreciation over the last few years, we’ve seen the same clients less enthusiastic about the buying process. Looking to the future, Neda Navab, President of National Brokerage Operations at Compass, made the following observation:
“July data represents transactions that began in April, May, and June – arguably the height of economic uncertainty caused by rising mortgage rates, rising inflation, and rising gas prices. But more recent economic developments have been more positive – including sustained reductions in gas prices, slowing inflation, stabilizing mortgage interest rates, and a recovering stock market – and these developments may yet be reflected in stronger housing data to come.”
We believe that a normalized market would be healthy overall for all parties, and we hope these predictions hold true.
Finally, there are a few demographics that point to a slow-down in the future housing market (do not interpret this as a market crash). We believe these points will neutralize the market and will not result in a drop in price:
Baby boomers aging in place will hold onto their homes, contributing to the ongoing inventory shortfall.
Millennials are the largest generation of potential buyers, but it is tough time for first time homebuyers. The main reasons being low inventory, high prices, and student loan debt.
A drop in the birth rate to a 100-year low could contribute to continued stagnation in the market: The birth of a child is often a motive to buy, and a child moving out is often an impetus to downsize and sell.
Low New Construction starts and decreasing mortgage applications does not bode well for increasing inventory.
With the constant news cycle, it can be daunting to figure out exactly what is happening in the market. We don’t have a crystal ball, but we hope that by combining our first-hand experiences with national stats and predictions from top experts, we can provide a comprehensive look at current trends and what’s to come. As always, if you have any questions about buying, selling, or the market overall, we’re here to help!