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Housing Market Shift? — The supply of homes is about to post its first year-over-year increase in about three years.
That’s not all, folks.
Realtors are seeing a slowdown in bidding wars and a cooling off in the market.
Affordability is a challenge. With interest rates on the rise, already expensive homes are becoming more expensive to buyers who logically will be financing their home purchases.
Especially in the new home market, construction is slow, and new homes are very expensive compared to median incomes by state across the continental United States.
Growth in inventories is led by mid-sized family homes remaining on the market. This is quite the shift: during the last two years’ housing bull run, these homes were the first to get snatched up, and typically the Spring is when these homes have the highest demand.
All of this might mean good news for buyers. For the last two years, sellers have carried most of the leverage. Just like employers in the digital economy, buyers were at the mercy of whoever was sitting on the other side of the deal.
It looks like things might slowly shift back towards a more even playing field for buyers.
But does this mean home prices will drop?
That’s unlikely. If anything, the rate of change in home prices will slow. Technically, only with one exception in the last 60 years, home values have only ever gone up in nominal terms.
Houses are real assets. They’re real property. Their value is inversely correlated with interest rates, but even a 3% move in mortgage rates doesn’t mean home prices will suddenly plummet.
If you’re in the market for a new house, you might stand a better chance of having an offer accepted near the asking price. However, if you’re waiting for a home price bubble to pop, I wouldn’t hold my breath. But then again, not financial advice.
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