Market Showing Signs of Slowing
After years of demand outstripping supply, the housing market is finally loosening up. Kiplinger reports that builders are scrambling to put up more homes and more homeowners are putting up “For Sale” signs. But, the rebound will be slow and uneven.
The process is just getting started. Listings across the US are up one percent from a year ago which is not much of a gain, but it’s the first increase since 2015. In 130 of the nation’s 500 largest metro areas, inventories are rising. That’s up from 70 a year ago.
Inventories will remain low a while longer, and prices figure to keep climbing. They are up five percent on average this year because of the low supply. Still, it’s the start of a more normal market.
Some western regions will see more listings. In many cases, because of steep price gains that are forcing would-be buyers out of the market, encourage more owners to cash out. Seattle, Portland, and most of California are in that very situation.
Buyers are giving up on the tightest areas, such as Boise, Idaho and Reno, Nevada. Sales drops now give builders a chance to catch up and bring those markets into better balance later on. Hot markets in Colorado, such as Denver and Colorado Springs, could see sales fall, too. A few local markets are getting back to a more balanced state between supply and demand. Inventories are nearly keeping up with sales in most of Florida and Texas, for example. A building boom in southwest Florida is keeping sales growing swiftly there.
Much-needed new construction is coming, especially in the South and West where 75% of new single-family homes are going up in places such as Montana, Idaho, Utah, Florida and other locations. Areas where home building is going strongest to catch up with demand are in California, Colorado, and Texas.
In the Golden State, building permits are up 22% on a yearly basis, even as scarce lots and shortages of skilled workers hinder builders. Brisk construction in Denver is helping to grow supply, though builders are focusing on higher-end homes and largely passing on starter homes, despite heavy demand. In Dallas, by contrast, much of the abundant new construction is targeting buyers looking to pay less than $300,000 which is good news for younger folks seeking a first home.
The biggest worry for the market now is affordability. Prices are 12% higher than they were at the peak of the bubble in 2006 and many buyers are straining to swing a home purchase. Mortgage rates haven’t helped by rising from their lows reached in 2012 and will keep on climbing to 4.8% on the average 30-year fixed loan (from 4.54% today). Meanwhile, expect banks to remain relatively stingy when it comes to home loans. Getting approved requires a substantially higher credit score now than a decade ago. More homes for sale will eventually help as buyers start to see more choices.
Keep a close eye on the housing market. Things are changing as supply comes in line with demand. The critical synergies between these two ends of the scale will cause flux.
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David WB Parker is a principal of Parker Associates of Jacksonville, Florida, marketing consultants to the real estate industry; President of PTC Computer Solutions, IT Specialist, and an active real estate sales professional with PARFAM REALTY based in Jacksonville, FL. He can be reached at 904-607-8763 or via email email@example.com.