A housing market defined by rapidly rising home prices, bidding wars, a lack of inventory, and sellers with the upper hand in negotiations may be changing. Lately, those who read economic tea leaves have been hinting that we may be heading toward a shift in the housing market. This makes sense, as surely national home price increases had to slow down eventually, right?
Make no mistake: Prices are not decreasing—at least, not here in Columbus and Central Ohio. Furthermore, there is no evidence on the horizon of a looming housing bubble about to pop. Median home list prices across the country are still up 7% year over year this August, according to an analysis of realtor.com data.
But those numbers are smaller than those from the past couple of years. In 2015 things were really rolling: Prices were soaring, multiple offers were the norm in many markets, and the number of homes available was falling fast. Last year, home list prices jumped 10% over the year before. The year before that, it was 9%. So while a 7% rise still sounds like a lot—especially compared with annual inflation of just 2.9%—it’s actually a very real sign that the market may finally be coming back down to earth there are signs pointing to a market that’s beginning to shift in greater favor of buyers than we’ve seen in recent years.
After all, home sales aren’t exactly tanking. Prices for existing homes in Columbus, Ohio are up 6.4%% from a year ago to $229,033. The median sales price in August was up 7.4% from last year.
So what does it all mean? Sellers shooting for the stars may not be able to get quite as much as they’d like. The local home builders have apparently caught on to this and in an effort to sell existing inventory before rates rise further and temperatures drop and the market slows as it does during the fall/winter season, builders have brought back incentives. Builders are substantially dropping prices of their market ready homes and introducing incentives to move remaining inventory. That said, this certainly isn’t a sell off and builder confidence has actually risen in recent months as builders continue to bet on the housing market motivated by motivated by solid housing demand, fueled by a growing economy and a generational low unemployment. According to Robert Dietz, Chief Economist for the National Association of Home Builders, “Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019,”. Additionally, he said that favorable economic tailwinds would continue to support demand despite the challenge on affordability due to ongoing price and increase in interest rates.
In an additional boon to buyers, the number of homes on the market is finally starting to rise. In August, 18 of the 45 largest housing markets, including such heavyweights as San Francisco, New York City, Los Angeles, Boston, Dallas, and Columbus saw more properties go up for sale than the previous year. Columbus saw 3,821 homes and condos added to the market in August, a 1.6% increase over the same month a year ago. That means folks not only have a better shot at closing on the home of their dreams, but they’ll also face less competition. And that helps to reduce competition and control runaway price inflation.
A recent report showed that more than one in four home sellers dropped their asking price last month. The areas seeing some of the largest price drops this year are Las Vegas; San Jose, Calif.; Seattle; and Atlanta. After years of strong price growth and intense competition for homes, buyers in these markets are taking advantage of the market’s easing pressure by being more selective about which homes to make an offer on and how high to bid. These are signs of a softening market, and this increase in price drops may be an indicator that sellers are going to begin to have trouble getting the prices, and the bidding wars, that they may have just months ago. We are seeing this trend locally in the upper middle and upper tiers of the markets where inventory levels are higher, however, inventory in the lower tier remains low while demand remains strong in the lower tiers of the market here in Columbus.
“We’ve hit that tipping point in many cities where what sellers think they can get is just not possible for many buyers,” “Now the pendulum is swinging away from sellers and back toward buyers.”
Economists point to housing affordability as a culprit for the slowdown. Mortgage rates are up .82% since a year ago; the 30-year fixed-rate mortgage averaged 4.65% as of Sept. 20. Each percentage point increase in rates can translate to a 10% increase in the total cost of a home, or the monthly payment which for the average buyers translates to about $143 more on their monthly mortgage payment.
Again this doesn’t mean that prices are going to drop, it simply means that rising interest rates are putting pressure on demand and there are limits to what people can afford.
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Salesin; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 Marysville 43040 43041 New Albany 43054 Pickerington 43147 Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235