Cooling Housing Market on the Horizon
Homebuyers, particularly in competitive regions like Seattle, San Jose, and Las Vegas have grown tired of the endless bidding wars, rising prices, and rising mortgage rates. Many first-time homebuyers have left the market disheartened, choosing to extend their leases for yet another year.
Though we can’t foresee what the real estate market will look like 10 years from now, we know that we’re experiencing a cooling market. Could this be a continuing trend?
The current real estate market is filled with seemingly contradictory extremes, where prices are high, but buyers are competing for available properties. The national median home price reached $276,900 in June 2018, setting a new record high, and marking an increasingly unaffordable housing market. Housing inventory is tight and according to the National Association of Realtors, properties were on the market for an average of just 26 days.
Most markets have been experiencing steady economic development, more job opportunities, and it’s clear that people still want to buy homes. But the National Association of Realtors has announced that existing home sales (which make up about 90% of home sales) have consistently fallen this year. Residential investment (including construction and brokers’ fees) has been continually shrinking.
The purchase of new homes has also slowed within the past year. Prices for existing homes grew 6.4% in May 2018, which was the smallest year-over-year gain since early 2017. S&P CoreLogic Case-Shiller data showed that property values rose 6.6% from April 2017- April 2018, but after adjusting for seasonal changes this increase was slight, and in some areas even declining. In June 2018, existing home sales went down for the third straight month according to a report by the National Association of Realtors.
More is on the way
New development builders tend to build only when they know that what they build will sell. Redfin recently reported that in the nation’s most competitive markets, new construction is working to meet the needs of homebuyers. According to an article by Bloomberg, San Jose housing inventory increased 12% year over year while rising 24% in Seattle and 32% in Portland.
In the Seattle area, the month of June was the first time the number of homes for sale has started to rise in the past decade. Compared to the number of single-family homes on the market in 2017, 2018 has seen a 43% increase, with some neighborhoods like Ballard, Greenwood and Beacon Hill more than doubling their housing inventory. In addition, condo inventory skyrocketed to 73%! The housing inventory in Seattle has increased for four straight months, from April to July. According to the NWMLS, “The number of active listings system-wide totaled 16,773 at the end of July, the largest volume since September 2016.” They reported that in King County the active listings have increased from 3,465 active listings to 5,116 active listings, which is a 48% increase from a year ago.
The Case-Shiller Index indicates that the Seattle area has seen the largest home-price increases in the country for the last 20 months in a row, but according to recent data by Redfin, 32% of Seattle area homes across the region had price drops in June 2018.
This news suggests several new real estate market trends occurring on a national scale, but these trends particularly affect our area. If you have any questions about how this news affects your real estate interests, give me a call.
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