By Charity Ohlund
Full tilt. With no emergency brake.
That’s how some have described the pace of the housing market in 2021. There was joy (but sometimes regret) in winning, and there was agony in defeat. Bidding wars got so intense that home price growth set an all-time record nationwide.
But with cooler fall air just around the corner, we are starting to feel an ever-so-subtle cooling in the housing market, too.
The rush of buyers into the market during the pandemic absolutely obliterated housing inventory. By April 2021, the number of homes for sale was down a staggering 53% from a year earlier.
However, the trajectory has finally shown signs of turning. For two straight months the number of homes for sale has gone up. Home listings on Realtor.com rose 3 percent in May, then again by 9 percent in June. That’s not all: We learned last week that new home sales are falling—their pace in June was the slowest since the onset of the pandemic. Every indication is that the market is shifting a bit in buyers’ favor.
What’s causing this? Home shoppers are finally showing some reluctance to pay over-the-top prices.
The housing market has been too hot for its own good. “That’s just … crazy,” has been a common phrase uttered among us industry folks, and especially by buyers, after seeing house after house get more than a dozen offers and sell for sometimes 20 or 30 percent over asking price.
This buyer hesitation is welcome and expected. After all, home prices can’t continue to grow more than 17 percent a year indefinitely. Household budgets can only stretch so far.
But before you do a little happy dance, cooling doesn’t mean home prices will fall. In fact, the research firm CoreLogic forecasts home prices will climb another 3.2% by June 2022. Make no mistake: This is still a seller’s market.
For now, this softening is ever so slight. Homes are still selling almost as quickly as they hit the market. The difference is that there are sometimes fewer offers, or fewer bidding wars, or they sell for slightly above or at asking price. Some sellers are slightly behind the times and are pricing their homes like it’s still May. Those homes may sell for less than the list price.
So why do research firms think prices may still go higher? It boils down to demographics. We’re in the middle of the five-year period when the largest tranche of millennials, those born between 1989 and 1993, are hitting their thirties—the age when first-time homebuying really kicks into gear. New home construction has not kept up, and the housing market is still benefiting from the perfect storm created by the pandemic: recession-induced low mortgage rates, coupled with remote workers who are willing to uproot in pursuit of affordable real estate.
If you were one of the thousands of people who decided to wait out the storm, give our team at Fountain Mortgage a call.
This weekly Sponsored Column is written by the employees of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.
Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268