In a previous article, I told you we were in a seller’s market. But where are we heading? Even though there is still a lack of homes for sale, the mortgage rates are, slowly but surely, going up. As a consequence buyers could become scarcer. Here’s a look at four items to better understand the rebound of the housing market at a national level.
First of all, the real estate market shifted in a short amount of time. In a regular market, prices increase after the inventory of houses for sale shrinks. In this unusual recovery, things went the other way around. Without shrinkage of inventory, developers decided to increase prices. They actually even admitted they pushed prices too far. For instance, when you compare the new home orders year-over-year, the demand only increased 1% in August against 11% in July. Nowadays, purchasers are more thoughtful before investing in a condo.
Then the demand of homes still exceeds the supply. As a consequence, the lack of inventory doesn’t allow prices to decrease. In addition, buyers are looking for the right house to enjoy it for a long time. So they are willing on waiting if nothing is available now.
On the other hand, the market has also cooled off. At the beginning of the year, purchasers were acting unreasonably and thoughts of another bubble were proliferating. That trend had damaged the relationship between home prices and incomes. To give you an idea, whereas home prices had increased of roughly 12% a year, incomes had only grown at a rate of 1%. The market couldn’t sustain much longer this gap.
Finally, any mid-term improvement in housing will depend on a few socio-economical questions:
– Will the mortgage rates continue to increase?
– How will the unemployment rate evolve?
– Which type of jobs (high-paid or part-time) will be created and will they have a sufficient impact on the housing market?
To conclude, becoming a real estate buyer nowadays is obviously still possible. If you want to have tips, check out this article .