Is the Housing Market Slowing Down?
The last few months have been very busy for the real estate market. Many areas seem to have corrected and although prices did rise through the summer it seems that now they have stabilized in many areas. The one thing that still seemed strong was demand, as buyers were still out there looking at homes and shopping. Until about a week ago.
I have noticed in the last week a drastic slow down in showings and phone calls, as well as new listings. When interest rates dipped under 4% last week I thought it would spur buyers and result in more pending properties, but that does not seem to be the case in my area. Here are some of the challenges that could be having an effect on the market:
Bond Market Collapse – Last week the bond market took a substantial nose dive. Did this create fear about the housing market? It is possible, but one has to consider that all markets are cyclical, and unless we are talking about a full blown economic crash it is doubtful that the one will affect the other.
Challenges in International Markets – There are still many European countries that are facing difficult economic times…could this create fear amongst US buyers? Possible, but again it is important to realize that our housing market just underwent a big correction and now is back on the track to normalcy, so fears about other markets outside of the US should not have an impact on whether or not a buyer purchases a home.
Time of Year – Typically the Fall-to-Winter housing market tends to be slower and include lower inventory. With the holidays and the end of the year many sellers choose not to list or take their active homes off the market. Many people are not thinking about purchasing homes at this time of year, except those who need to (and actually, if you can do it, it is a great time to sell…click here for more information)
Lack of Inventory – This definitely could be a reason why the market seems to be slowing. Summer did finally see an increase in inventory in many markets that had been in an inventory slump for a while, but there are fewer new listings now; this could be due to a variety of factors, most notably the time of year. Once the holidays have passed we should slowly start to see inventory creep up, as we head into the Spring and Summer.
Fear – There is still talk out there of a housing bubble, believe it or not. This could be creating fear amongst buyers, and in addition to any of the above categories could combine to make some think they’d better sit on the fence for a time and see what transpires. Personally and professionally, I do not agree with this viewpoint. I believe most markets HAVE stabilized, and that we have returned to a more “normal” housing market. I do not believe we will see more than a 3-5% annual price increase moving forward from year to year. Those who are in the market solely to make a profit won’t have much opportunity to do so, but conditions will be perfect for those who are purchasing with long term benefits in mind. There will always be issues and problems that could affect housing, BUT housing is still historically one of the most stable markets in which to invest.
The bottom line is that buyers need to feel comfortable when they are contemplating a home purchase. Sellers also need to feel comfortable in listing their home. Overpriced homes will not be sold in the current market; of course there are always exceptions, but in general we will not see this happen now or in the coming year, in my opinion.
The key for any buyer or seller is to get educated on the neighborhoods in which they are focusing their searches, and to really understand comparable values. Working with a skilled area agent is the first step in the right direction. Buying a home can feel scary, but in reality it should not be a difficult decision for those who understand the local market. Renting has been proven to be more expensive, but is also more risky -rents can be raised, leases can be terminated, and rental properties can be sold, leaving tenants to find another – which is no easy task.
