A Window of Opportunity for Homebuyers

Mortgage rates are much higher today than they were at the beginning of the year, and that’s had a clear impact on the housing market. As a result, the market is seeing a shift back toward the range of pre-pandemic levels for buyer demand and home sales.But the transition back toward pre-pandemic levels isn’t a bad thing. In fact, the years leading up to the pandemic were some of the best the housing market has seen. That’s why, as the market undergoes this shift, it’s important to compare today not to the abnormal pandemic years, but to the most recent normal years to show how the current housing market is still strong.Higher Mortgage Rates Are Moderating the Housing Market The ShowingTime Showing Index tracks the traffic of home showings according to agents and brokers. It’s also a good indication of buyer demand over time. Here’s a look at their data going back to 2017 (see graph below):Here’s a breakdown of the story this data tells:The 2017 through early 2020 numbers (shown in gray) give a good baseline of pre-pandemic demand. The steady up and down trends seen in each of these years show typical seasonality in the market.The blue on the graph represents the pandemic years. The height of those blue bars indicates home showings skyrocketed during the pandemic.The most recent data (shown in green), indicates buyer demand is moderating back toward more pre-pandemic levels.This shows that buyer demand is coming down from levels seen over the past two years, and the frenzy in real estate is easing because of higher mortgage rates. For you, that means buying your next home should be less challenging than it would’ve been during the pandemic because there is more inventory available.Higher Mortgage Rates Slow the Once Frenzied Pace of Home SalesAs mortgage rates started to rise this year, other shifts began to occur too. One additional example is the slowing pace of home sales. Using data from the National Association of Realtors (NAR), here’s a look at existing home sales going all the way back to 2017. Much like the previous graph, a similar trend emerges (see graph below):Again, the data paints a picture of the shift:The pre-pandemic years (shown in gray) establish a baseline of the number of existing home sales in more typical years.The pandemic years (shown in blue) exceeded the level of sales seen in previous years. That’s largely because low mortgage rates during that time spurred buyer demand and home sales to new heights.This year (shown in green), the market is feeling the impact of higher mortgage rates and that’s moderating buyer demand (and by extension home sales). That’s why the expectation for home sales this year is closer to what the market saw in 2018-2019.Why Is All of This Good News for You?Both of those factors have opened up a window of opportunity for homeowners looking to move and for buyers looking to purchase a home. As demand moderates and the pace of home sales slows, housing inventory is able to grow – and that gives you more options for your home search.So don’t let the headlines about the market cooling or moderating scare you. The housing market is still strong; it’s just easing off from the unsustainable frenzy it saw during the height of the pandemic – and that’s a good thing. It opens up new opportunities for you to find a home that meets your needs.Bottom LineThe housing market is undergoing a shift because of higher mortgage rates, but the market is still strong. If you’ve been looking to buy a home over the last couple of years and it felt impossible to do, now may be your opportunity. Buying a home right now isn’t easy, but there is more opportunity for those who are looking.

What’s Causing Ongoing Home Price Appreciation?

If you’re thinking about making a move, you probably want to know what’s going to happen to home prices for the rest of the year. While experts say price growth will moderate due to the shifting market, ongoing appreciation is expected. That means home prices won’t fall. Here’s a look at two key reasons experts forecast continued price growth: supply and demand.While Growing, Housing Supply Is Still LowEven though inventory is increasing this year as the market moderates, supply is still low. The graph below helps tell the story of why there still aren’t enough homes on the market today. It uses data from the Census to show the number of single-family homes that were built in this country going all the way back to the 1970s.The blue bars represent the years leading up to the housing crisis in 2008. As the graph shows, right before the crash, homebuilding increased significantly. That’s because buyer demand was so high due to loose lending standards that enabled more people to qualify for a home loan.The resulting oversupply of homes for sale led to prices dropping during the crash and some builders leaving the industry or closing their businesses – and that led to a long period of underbuilding of new homes. And even as more new homes are constructed this year and in the years ahead, this isn’t something that can be resolved overnight. It’ll take time to build enough homes to meet the deficit of underbuilding that took place over the past 14 years.Millennials Will Create Sustained Buyer Demand Moving ForwardThe frenzy the market saw during the pandemic is because there was more demand than homes for sale. That drove home prices up as buyers competed with one another for available homes. And while buyer demand has moderated today in response to higher mortgage rates, data tells us demand will continue to be driven by the large generation of millennials aging into their peak homebuying years (see graph below):Odeta Kushi, Deputy Chief Economist at First American, explains: “. . . millennials continue to transition to their prime home-buying age and will remain the driving force in potential homeownership demand in the years ahead.”That combination of millennial demand and low housing supply continues to put upward pressure on home prices. As Bankrate says:“After all, supplies of homes for sale remain near record lows. And while a jump in mortgage rates has dampened demand somewhat, demand still outpaces supply, thanks to a combination of little new construction and strong household formation by large numbers of millennials.”What This Means for Home PricesIf you’re worried home values will fall, rest assured that experts forecast ongoing home price appreciation thanks to the lingering imbalance of supply and demand. That means home prices won’t decline.Bottom LineBased on today’s factors driving supply and demand, experts project home price appreciation will continue. It’ll just happen at a more moderate pace as the housing market continues its shift back toward pre-pandemic levels.

Great News About Housing Inventory [INFOGRAPHIC]

Some HighlightsExperts say the number of homes for sale is growing this year, and that can have a big impact on your move.If you’re planning to buy, additional options in today’s market may be just what you’ve been waiting for. More inventory means added opportunities to find the home of your dreams.Let’s connect so you have the latest information on available homes in our area.