In many markets across the country, agents today are faced with solid demand for housing and too few homes for sale, leading to a perfect storm where prices have nowhere to go but up.
However, there is another scenario – one that may cause sleepless nights for some agents – where potential buyers stay on the fence when it comes time to buy. According to a CNBC report, price gains month to month have been coming down. In July, the latest reading on home prices, the price gain compared with a year ago stabilized at 6.2 percent. That annual gain had been accelerating in every other month this year, according to Black Knight Financial Services.
Over the years, home prices have historically always lagged sales, and sales have been falling for the past several months.
Even though prices are not falling, the gains are cooling. When it comes to home prices, national numbers often don’t speak to the thousands of local housing markets, but some of the nation’s biggest areas are seeing changes. Andrew LePage, a research analyst at CoreLogic, noted that Southern California’s median sale price stayed largely still this summer, hovering right around $500,000 between June and August.
“But this summer’s year-over-year gains each month averaged 8 percent, an increase from an average gain of 6 percent last summer. The 7.5 percent year-over-year gain in the August 2017 median sale price understates the rise in the cost of homeownership over the past year because a roughly 0.5 percentage point gain in mortgage rates over that period has caused the mortgage payment – principal and interest – on that median-priced home to increase nearly 14 percent.”
According to a report from the National Association of Realtors, more current renters think now is a good time to buy a home, but fewer plan to do so, even though most expect their rent to rise next year. Lawrence Yun, chief economist for the Realtors, said they simply can’t afford the down payment on the current high-priced homes.
“Even though the typical down payment of a first-time buyer has been 6 percent for three straight years, two-thirds of respondents indicated that saving for one is difficult right now. Rents and home prices have outpaced incomes in the past few years, and this is undoubtedly impacting their ability to put aside savings for a home purchase, even if they increasingly believe it’s a good time to buy.”
Agents still are seeing buyer competition, but that seems to be cooling. Redfin CEO Glenn Kelman noted the company recently released a report that indicates while annual price gains were still high, monthly gains over the summer were flat. That may be the result of fewer bidding wars.
“The real estate market still favors sellers, with strong demand and rising prices, but perhaps less so now than earlier in the year. Newly listed homes are selling faster in 2017 than in 2016, but … the gap between 2016 and 2017 is narrowing slightly. Normally such differences wouldn’t be worth mentioning, but Redfin managers of coastal markets where demand has been strongest are now reporting that some buyers are stepping back from higher prices.”