Throughout the year we’ve seen the market make incredible leaps and bounds towards a full recovery, but with the summer coming to an end and the weather beginning to cool off, the housing market is cooling off as well.
This year there have been many record breaking changes in the market. Home prices have risen significantly from their lows only a couple years ago, mortgage rates have begun to return to their pre-crisis levels, and sellers have started to return to the market.
These factors, among others, have greatly influenced the markets recovery, but these are also are some of the reasons why the market is beginning to slow down once again. This means that home buyers, sellers, brokers, and agents need to be ready for more changes.
Although the market is still growing, the rate at which it is doing so has slowed. There are many simple reasons for this though, which is why many experts believe this is just another phase in the markets recovery, but one that is slower.
One factor playing a major role in this change is the increase of sellers in the market. Realtor.com reported that inventory rose by 7.8% in Los Angeles and 12.5% in San Diego in July. Higher prices have encouraged more sellers to enter the market, which in turn has increased inventory and lowered the demand for housing, decreasing prices.
This decrease in demand has also lowered the amount of multiple-bid competitions, further decreasing the price at which homes would be sold for. This change has been seen since July, when asking prices declined .33% from the month before, the first drop since November the year before.
Another factor playing a role is the decrease in affordability. The National Association of Home Builders reported a reduction in affordability by 4.4% from the last quarter. This has been a product of price increases combined with increased mortgage rates, and with the lower affordability of housing, the amount of buyers has decreased as well. Redfin reported a reduction of 3.5% in home showings last month.
These changes may be alarming considering how quickly the market has been growing over the past year, but many experts are stressing that this is a healthy change in the market. Experts such as Frank Nothaft, Freddie Mac’s chief economist, believe that this is just a new phase in the housing recovery. This phase is may be slower, but much more sustainable.
Have you been noticing these changes? What are your thoughts?
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