Good News For Home Buyers
High home prices are a mixed bag. Rising home prices are great for home sellers and for homeowners, who love to see the value of their home and equity increase. For home buyers, it is not necessarily ideal. However, home price is not everything. Prices can be higher than previous years, but still be a good value based on other factors. That is the case with today’s real estate market. Home prices are high, but because mortgage rates remain near historic lows, buying a home at today’s prices is still a good value. That is why home buyer demand is still surging. While high prices are not a deterrent to home buyers, they also are not ideal. After all, who wouldn’t want to buy a house for at or less than the asking price? Thankfully, the number of home sellers is increasing, which is good news for home buyers.
Home Inventory is the Key to Home Buyer Relief
Home prices in and of themselves do not tell the whole story of the housing market. Prices are made up of supply and demand. Home buyer demand is there and will remain there as long as mortgage rates remain at rock bottom levels. For the past year and a half, the problem has been that the supply has been missing. The lack of homes for sale has been the main contributor to rising home prices. The ideal situation for home buyers would be for mortgage rates to remain at or near current levels while the supply of homes for sale increases. Thankfully for home buyers, this ideal situation might actually be turning into a real estate market reality.
Home Inventory is Increasing
The most recent data is positive for home buyers insofar as it points to an increase in home inventory over the past few months. According to realtor.com, active listings have increased over each of the last four months. It appears that the rising inventory is already having an impact on home prices. Home prices are starting to level off across the country. That does not mean that the market is reversing or that prices are dipping. Instead, it means that home prices are not rising at the same types of record year-over-year increases that we were experiencing earlier this year. Availability trends are promising for home buyers, but what is not clear is if these trends are temporary or truly signal a turning of the market.
Home Inventory has been Historically Seasonal
Historically, home inventory has been seasonal. Traditionally, inventory increases during the summer months, but begins to fall as we head into winter. Logically, this makes sense. Homeowners are less likely to sell their homes during the winter months for a number of reasons. First, many homeowners try to avoid moving during the school year. They want to avoid having to switch schools mid-year, and even if they don’t have to switch schools, they do not want to disrupt schedules. Second, homeowners want to avoid having to move during the winter months just because winter weather makes moving difficult. It is one thing to move in winter if you are a home seller in West Palm Beach. It is entirely another thing when you are dealing with winter storms in Boston.
It is not clear if these trends will apply to this year because they certainly did not in 2020. Last year, active listings of homes for sale peaked during April. After that, they fell off dramatically, which helped lead to the inventory crisis that caused a dramatic increase in home prices. The main driver of a collapse in active listings was the pandemic. Lockdowns and fear of the virus caused potential home sellers to take their hoems off the market or never put them on in the first place. While we are still living with the pandemic, we are much closer to pre-pandemic life than we were in the summer of 2020. As such, homeowners are much more comfortable listing their home and having home buyers walk through it. The rising number of listings seems to validate homeowner comfort with the pandemic.
What is less clear is if this year will defy historical trends by seeing more active listings as we head into fall and winter months. There is a chance that inventory will be higher this year than in previous years because home sellers are interested in trying to take advantage of pent up demand. At the same time, new home construction projects will trickle into the market, as will home foreclosures now that the forbearance extension ends in a few weeks.
Final Thoughts
It is impossible to predict what will happen to the number of active listings going forward, but it is clear that data from the previous few months is positive for home buyers. Home prices are leveling off and it seems like there are a number of ways that home inventory will be increasing. As such, it seems likely that the extreme sellers market is waning and that home buyers are in a much more favorable position. Home buyers should prepare for this reality by making sure that they have everything in place to jump on a good deal when it presents itself.
First, this means that you have a mortgage broker that you trust who can help you facilitate a home loan. Second, this means taking the steps to get pre-qualified for a mortgage. This will help you set your budget for your home search and will help you stand out from other home buyer competition. The bottom line is that home buyers should not be sitting back and waiting to make a move when the market turns. The truth is that the market has already turned and now it is time to take advantage of it.
