We’ve covered the hot seller’s housing market pretty extensively here, but there are some more trends emerging as we head into the fall season that are certainly worth bringing up.
For starters, real estate agents haven’t been closing as many deals lately. While we’ll get more into that later in this piece, part of the reason for the transaction slowdown is actually because the economy is booming right now. This is partially what’s led the Federal Reserve – much to the president’s dismay – to raise interest rates. Higher interest rates mean more expensive mortgages, something that is forcing homebuyers to more carefully assess their situation.
Coupled with that, here’s a look at some other factors that are influencing the housing market:
Construction is Slowing, Yet Prices are Still Rising
Once the U.S. came out of the great recession, new home construction boomed. It wasn’t as high as it was in the late 90s and early 2000s, but compared to the lull in construction from 2007-2009, it was definitely on the uptick.
Now, home construction is leveling off. Part of the reason is attributed to the tariffs that have been imposed, making it more expensive to get materials to build. Other experts, perhaps more controversially, cite a lack of labor, as immigrants are a key makeup of the building workforce.
The flat lining new home construction is translating to less inventory on the market, which is leading to rising housing prices. It’s the concept of supply and demand. When there’s lots of demand and limited supply, costs are going to be at a premium. When you factor in the Federal Reserve’s recent action in raising interest rates, houses are just flat out expensive these days.
This is all forcing would-be buyers into a tough corner. Do they want to reach a little deeper into their pockets to buy a home? Or would they be more wise to sit this one out and wait for real estate prices to come down?
Inventory is Low, But How Low?
We already mentioned how there’s less inventory on the market right now. In fact, according to the National Association of Realtors, home sales have fallen for the fourth consecutive month, representing a low that hasn’t been reached in about two years. What’s more, there’s ample opportunity in the rental market, something that is further permitting would-be homebuyers the option of halting their search in the near-term until housing prices dip.
Are Foreclosures Back on the Rise?
Don’t freak out about this point, as foreclosure rates are nowhere near what they were at amid the great recession. But it is worth noting that there are some signs that indicate foreclosure rates are back on the up-and-go.
This trend is mostly in areas that have been devastated by natural disasters within the past few years, like Houston, for instance. There’s also been an uptick in foreclosures in areas with expensive property values, like Los Angeles, Miami and San Francisco.
Again, foreclosures are nowhere near what they were 10-12 years ago, and the modest uptick that we’re seeing now isn’t likely to have much of an impact on the housing market overall, much like it did in the years leading up to – and throughout – the great recession.
Again, while the housing market is changing, overall it is still very healthy. In fact, in a recent Freddie Mac forecast, the corporation admitted that the market was likely to stay fairly slow for the remainder of 2018. However, this isn’t likely to be a bad sign moving forward, as the lender also stated that a strong economy and low unemployment will continue to support home purchases. Another factor that also must be taken into account is that the traditional real estate “season” is now at an end. Activity tends to pick up in the spring and summer months, as home buyers want to get settled before a new school year and prior to the holiday season.
Are you planning on buying a new home in the near future? If so, be sure to take note of these trends in the housing market.
Regards,
Ethan Warrick
Editor
Wealth Authority
