Housing Markets: Are they Cooling Down or still Smoking Hot?
These are the basic units of temperature in the International System of Units (SI) . But ever wonder how we measure the degree of temperature for real estate actions these days? While we can always expect summer heat to boil up the temperature, the U.S. housing market—which was known to be sizzling hot for several years—might be taking a bizarre turn.
Are we headed for more housing market’s roller coaster ride?
Surely, home prices are still rising. But the recent data shows an increase in the number of homes for sale, days spent on the market and price cuts. Just always bear in mind that, while prices are still projected to go up, growth is expected to slow down by a few percentage points. So, you could be in a good position when you’re ready to sell. But you might not want to wait far too long.
Now Real Estate IQ, the No.1 in Deal Finding, attempts to give you a clear view on how this will impact you if you’re a current homeowner, a possible homebuyer or a potential home seller.
Housing Market: Hot Or Not?
The number of homes for sale is increasing, which offers buyers more options. Because the market’s been sizzling, it’s been pretty rough out there for home buyers. If you’ve been on the hunt for a home, there’s a great deal of chances that you’ve seen plenty of houses you like, but they were already under contract. Or maybe you’ve ended up on the short end of so many bidding wars that you’ve lost count of them all.
One important notion that’s consistently being talked about in real estate investing is the idea that it’s all about “location, location, location”. As cliché as it may sound, this is absolutely true. No matter what those figures might say on a national scale, it would mean nothing if they don’t match up with your experience in your local market.
Mortgage Rates Should Remain Low
Low mortgage rates tend to be favored by economic uncertainties. If it looks like things might be going poorly or are even uncertain, investors pull their money out of stocks in favor of bonds, preferring a smaller guaranteed return instead of the potential for bigger revenues (or equally big losses) in the stock market. This, combined with the fact that the Federal Reserve has lowered short-term interest rates in an attempt to maintain the economic equilibrium and dodge the impact of global risks, should keep mortgage rates low for a while.
Low Housing Inventory
Low housing inventory is something that’s slowed down the market for a while and paralyzed home sales. Why does it keep on happening? There simply haven’t been enough homes available to meet the demands. But home buyers who are looking for a little relief can finally breathe easier. Compared to this time last year, the number of houses on the market in the U.S. has grown by 4%, and it shot up by 10% in the 50 biggest cities.
One of the effects of low mortgage rates may be that sellers can expect their existing homes to stay on the market for a bit longer. This may seem a little bit off until you realize that urgency drives sales. The number of days homes spend on the market might be increasing—which prompts sellers to get their properties sold soon. You might think sellers are having a harder time selling their homes since they have more competition. But it’s not quite the point. In fact, houses spent an average of 58 days on the market in April—which is only one day less than last year. So, while the national average for days on the market has gone down by one, there seems to be a greater chance of an increase here.
Home Prices Slowly Rising Up
Home prices over the last several years have gone up at a rapid pace. While the trend of rising prices should continue, making for happy sellers, there’s also good news here or buyers. Reports show that home values are appreciating at a much slower pace than they were a year ago.
Generally, if gains in home values are slower and more in line with wage growth, it makes homes easier to afford for those who are in the market.
Perspective for Buyers
Even though the housing market seems to be cooling, buyers may still have to be competitive to get the house they want. So, if you’re planning to buy before the end of the year, make sure you’re fully prepared.
If you’re looking to buy a home, this is music to your ears! After all, it’s hard to be upset about lower mortgage rates. And if the price cuts continue, prospective home buyers will gain more negotiating power.
Perspective for Sellers and Homeowners
It’s easy for homeowners and sellers to get shocked when they hear words like the housing bubble happening all around. First, take a breather!
Like what was mentioned earlier, home values are still on the rise and will likely continue to be for the next couple of years. But, with more homes on the market, demand is taking a dip—which means some buyers may opt to wait as the housing market levels off again. So you might need to check your approach.
- Be willing to readjust your price. Savvy house hunters can sniff out overpriced homes from a mile away. If your home has been sitting on the market longer than expected, talk to your real estate agent about lowering the price. Gauge if it will hurt and damage so much. Perhaps yes, but the longer your home stays on the market, the more doubt seeps into buyers’ minds about how great your home really is. If your listing becomes outdated, buyers are more likely to skip over it.
- Stay patient. With demand leveling off, you could see a drop in the number of offers you expected just a year ago. That’s okay! It might take a little longer than usual to sell your home as the housing market cools down. Stick with the home-selling process, and use the time to work with your agent and get your house in order!
- Stay on top of the trends and work with a pro. Whether you’re in a hot market, a cold one or somewhere in between, buying a house can be stressful. So partner with an experienced real estate agent. A good agent will walk you through all the complex details of buying a house to close on a home—no matter what the housing market looks like!
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Takeaway for Buyers and Sellers
Sometimes, we find ourselves at a point in time when the housing market is really good for both home buyers and sellers. Mortgage rates are low and home prices are still rising. With the impact of the trade war and other global events, it’s hard to predict what will happen next to the housing market. What we can tell you for sure is that whether you’re in the market to buy or refinance a home, now is a really good time to lock your rate.
Things can change rapidly from one month to the next. And what is happening in the housing market of one state might be quite different from what is going on in another. That’s why it’s important to work with an experienced real estate agent who can help you navigate the trends in your specific area. Whether you’re a homeowner looking to sell your house in a rush or a first-time home buyer trying to make sense of it all, working with one of our affiliated real estate professionals will help you reach your goals. As to the real question, the housing market might have shown some signs of cooling down…and it’s totally fine. It’s just a phase, and this too shall pass.
But keeping a general view of the current situation, the market and the real estate industry are still smoking hot with opportunities for successful investments. And that is our clearer view of the bigger picture.
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Source: Data analysis courtesy of the National Association of REALTORS®.