A high majority of our country’s adult population has been, or will become, homeowners. We all read or listen to (at least) the headlines of real estate related news. From 2012 through the first half of this year, the news related to the housing market, interest rates, and the economy has generally consistently improved month over month and year over year. I believe most of us realized that things would change at some point. When might this happen, would it be gradual, or more like the recession in 2008?
First of all, there is nothing resembling a housing bubble. There is clearly no recession in sight, and home values will continue to improve, but not at the same rate as the previous 5 years (+/- 10%). Over the last few months, we have seen about 1/3 of sellers reduce their prices before going under contract. So, as the market moves forward, homeowners will still enjoy improved values, but buyers (and sellers becoming buyers) will have a more relaxed and enjoyable experience shopping for their new improved lifestyle.
The key fundamentals of a balanced, healthy housing market will remain strong: good employment, positive consumer confidence, and of course changing demographics leading to new household formations.
As prices increase more moderately, interest rates are at, or temporarily below 5%. Nationally, price appreciation (YTD) is still at 5.5% and in Denver nearly 8%. As reported by Corelogic / Case Shiller indexes. According to Lawrence Yun, NAR’s (National Association of Realtors) chief economist, “2017 was the best year for home sales in 10 years, and 2018 is only down 1.5% YTD”. This very mild adjustment, compared to long-term growth potential should not influence qualified consumers from missing out on historical gains in wealth, by pulling back in the near future.
My suggestion is not to just read, or listen to the headlines but to learn beyond, read a little deeper, and talk to professionals. The biggest concern can be reading pessimistic (or sensationalized) headlines regarding a housing bubble, or fears of inflation. Yun also reported “most states are reporting stable or strong market conditions; housing starts are under-producing, and we are seeing historically low foreclosure levels which indicate people are living within their means. This is a stronger, more stable market compared to the loosely regulated market leading up to the bust”.
Home inventory has fallen for four years straight, creating record-low inventory levels, which is in direct contrast to the inherent and continuing demand levels. In Denver, this is already changing as inventory levels this fall are 30% higher than last year at this time; consequently, it is taking longer to sell a home.
My experience over the last few decades would suggest that winter months may be a great time to purchase. Although there is a little less inventory to choose from, homes that have been on the market for 30-60 days (or more) may be more open to negotiation. People have successfully located homes at this time of year that had become a little stale on the market. In many cases, the only thing wrong with them was that they started off asking too much. Ask your realtor to show you the listing history on the property you’re interested in. While the winter months can be more difficult to gauge, the early spring market is traditionally when the annual increase in price appreciation begins. In the past few years, I’ve spoken with many would-be sellers that delayed placing their house on the market because they were concerned it might be difficult to find a suitable replacement home due to low available inventory.
Times are a-changin! The supply of “for sale” homes has been increasing. Homes are selling, but are taking longer to sell (allowing buyers more time to shop), prices are rising moderately, and interest rates are still in the 5% range…pretty darn close to a perfect storm.