Many housing industry experts are guardedly predicting that the softening/slowing of home sales and home prices that began last summer may be turning around.
“I don’t think we’ll get back all the way to…the frenzy we saw at the beginning of 2018…(but)…it’s certainly a possibility that home sales and prices will pick up…” said Danielle Hale, chief economist with realtor.com. Hale’s primary reason for her “soft” prediction is mortgage interest rates falling below 4.0%.
Low mortgage rates, rates as low as 3.75% in early July 2019 and predicted by Fannie Mae to be 3.7% for the remainder of 2019, often serve as catalysts for prospects to become buyers. Those buyers as borrowers could save tens of thousands of dollars over the life of a 30-year, fixed rate loan at 3.75% as opposed to a fixed rate loan of 4.25%…and prospects/buyers/borrowers do NOT want to miss out on such savings.
Additionally, realtor.com’s economist Hale is expecting the number of homes available for sale will decline. Why? Inventory growth has already begun to decline from 2.9% in May to 2.8% in June 2019 and experts expect that inventory growth to fall even further through the end of this year. And what happens when inventory growth declines and/or remains flat? Home prices go up.
If market conditions hold to industry expert opinions, prospective buyers will buy sooner rather than later as to not miss out on mortgage interest rates, sales volume will rise, inventory will fall and home prices will also rise.
Which markets are likely to benefit the most if home prices begin to rise again? Homes on the coast where prices will go to even greater highs in San Francisco, San Jose and Seattle.
According to Patrick Carlisle, chief marketing analyst with the San Francisco Bay Area Compass office, “The slowdown (in sales and prices) is definitely reversing in San Francisco.” New highs in both median house and condominium prices registered in June at $1.7M and $1.3M, respectively.
Carlisle attributes the current turnaround in Bay Area home sales and prices to low interest rates, a strong stock market and, to some degree, recent IPO’s for Bay Area located companies such as Lyft, Uber and Slack. “The markets are much hotter than they were in the second half of last year though not as hot as they were in the Spring of 2018 when the Bay Area housing market experienced its hottest market in 18 years.”
Such a “borderline” market is difficult for both buyers and sellers. Buyers fear the economy may falter and/or a recession may come into being in later 2019 or early 2020. Sellers (and buyers) fear mortgage rates may go up making it more difficult to replace their now sold home without having to pay more for their “new” loans on perhaps a lesser or smaller home.