The leaves are falling quickly and the other day I was standing on a deck in Orwigsburg and it started sleeting. Already. It’s supposed to snow here on Thursday. Well I may not be ready for sleet and snow yet, but it’s coming, and so is the seasonal slow down. Every year buyer traffic starts to slow in late August and September, then drops of quickly in October and November until we get through the holidays. For the past two years I’ve been telling you it’s a strong seller’s market with lack of good inventory for buyers in Schuylkill and Berks Counties. That started to change this summer.
In fact, the seasonal slow down started over a month earlier than “normal”. We saw showing requests drop off in July, earlier than we normally see this happen. Pending sales also slowed down at the same time. Many experts believe we’re headed for a turning of the market. It’s inevitable. Real estate sales are cyclical. They go up and down depending on many things, including the economy, interest rates, supply of housing, and local variables as well. We couldn’t stay in a strong seller’s market forever.
Right now, we’re settling into a balanced market, but by next spring we may be swinging into a buyer’s market again. Higher interest rates scare young and weaker buyers out the market, as they are priced out of the houses they want and may no longer be able to afford. Shaky stock markets scare older and more settled buyers out of the market, as they worry about their savings and the future.
According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the inventory of homes for sale this year compared to last year has increased for the last four months, all while sales of existing homes have slowed compared to last year’s numbers.
For over three years leading up to this point, the exact opposite was true; Inventory dropped as sales soared.
NAR’s Chief Economist Lawrence Yun shed some light on what could be contributing to this shift,
“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.”
Since January, 30-year fixed mortgage interest rates have increased nearly a full percentage point (from 3.95% to 4.9%). Fannie Mae, Freddie Mac, the National Association of Realtors, and the Mortgage Bankers Association are all in agreement that rates will continue to increase to about 5.2% over the next 12 months.
“The rise in [mortgage] rates paired with this very strong price appreciation absolutely is slowing housing,” said Fannie Mae’s Chief Economist Doug Duncan.
Even though rates are higher than they’ve been in a decade, they still remain below the average for the 1970s, 80s, 90s, and 2000s!
Elizabeth Mendenhall, President of NAR, said it best, “Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range.”
Prices of starter and trade-up homes have appreciated faster than their higher-priced counterparts. Over the last 5 years, the lowest-priced homes have appreciated by 47% while the highest-priced homes have appreciated by only 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.
Although not fully to blame for the national shortage in sales and inventory, natural disasters like Hurricane Florence, Hurricane Michael, and the wildfires on the West Coast have certainly had an impact.
Additional inventory coming to market could help normalize the housing market and allow incomes to catch up to home prices. For more information about sales and inventory in our area, let’s get together so we can help you make the best decision for you and your family.