It looks like the housing market is showing signs of change.
The last 2+ years have seen huge increases in prices, historically low interest rates, and extreme inventory shortages.
Today, however, we seeing the early signs of a housing market change.
Home Prices and Inventory
Home prices have skyrocketed over 35% in the last 2+ years…and even more in some parts of the west. This has to do with increased demand and low supply (you might remember this from your Econ 101 class). Couple that with low interest rates, and you have a true barn burner on your hands!
Recently, though, it looks like more homes are coming to market.
Phoenix, for instance, has been one of the hottest markets in the US. Inventory has been at near all-time lows over the last year-and-a-half.
However, in the week of 5/16 through 5/22, more than 3,000 active listings have been added to the ARMLS residential database. That’s more than any time since 2010. Home inventory is now growing at the fastest rate since 2005 in the Valley of the Sun.
As another example, the mountain communities of Southern California have seen inventories essentially double in the last 3 months…and buyers are now starting to see price reductions on homes that haven’t sold as quickly as sellers would like.
That’s something that market hasn’t seen for years.
Home Sales and Starts
Per data from Redfin, April had a 9% year-over-year decline in homes for sale — the smallest annualized decrease since March 2020 and the first single-digit drop in supply for any month since the COVID-19 pandemic started.
And as you can see in the graph above, housing starts are increasing as well, but not quite as fast as demand.
While the inventory issue may be showing signs of easing, homes continue to sell quickly. The typical home that sold in April went under contract in only 18 days, Redfin reported. That’s six days faster than the same month last year and the shortest average time on market ever recorded in April.
What most industry analysts are forecasting are that prices will likely go up more slowly than they did in early 2021, but they will keep rising, just at a slower rate.
From Justin Pope at The Motley Fool…“Home prices will likely peak when supply and demand meet in harmony, which doesn’t seem to be the case yet. It’s hard to make that case until I stop coming across mobs of people trying to squeeze into an open house showing. When sellers no longer can turn away buyers offering thousands over the asking price.”
“There could be a recession coming, and mortgage rates might keep rising, like buckets of water trying to calm the raging fire of home prices in the U.S. Nobody knows for sure what will happen next, but I don’t see enough evidence that prices will be plunging anytime soon”
David Crown in Forbes for investors – “Multifamily also appears poised to remain on the incline. In fact, CBRE expects a record-breaking 2022 for the sector: “We forecast multifamily occupancy levels to remain above 95% for the foreseeable future and nearly 7% growth in net effective rents next year.”
Julie Vincent from Mashvisor – “Though the housing market prices are expected to jump at the beginning of the year, experts predict that towards the second half of the year, prices are to stabilize. It is due to more inventory being available and, therefore, more choices for buyers. Property values are expected to remain more consistent.”
It does appear that there’s change on the horizon in the housing market. It looks like things are beginning to move back towards a “normal” cycle, with increased supply and single digit valuation increases anticipated later this year.
Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s changing market. It would be my pleasure to help you!