Is the US housing market starting to cool down
Over the last few years we have written several articles on the US housing market and how we seen a shortage of supply leading to a frenzy of rising prices and bidding wars.But now with interest rates on the rise in the US it looks like we are starting to turn a corner, some markets in particular are starting to slow down.Is this a good thing or a bad thing ? Well it depends if you are the Buyer or Seller ? If you are buying a property it puts you in a stronger position as Sellers need to adjust their expectations. Bill Kowalczuk from Coldwell Banker Warburg said “Sellers have to be more realistic” It is important to note that this cooling down is not across the whole of the US but seems to be in certain pockets in different States. We see the biggest cooling down taking place on the West with California leading the way but we need to bear in mind that cities like San Jose and Sacramneto probably seen the highest levels of over heating in the last few years. According to Federal Reserve data, the average US home selling price during the first quarter of 2020 was $329,000, with that number rising to nearly $429,000 two years later. Real estate agents say bidding wars have become less frequent and inventory is rising. A growing share of sellers are also being forced to trim their asking prices to find a buyer.But it is not just on the West we also see cooling down in cities like Albany in New York, El Paso in Texas, Rochester also in New York and Bridgeport in Connecticut. So we can see its the higher priced markets that are being the most impacted as 30 year mortgage rates are approaching 6%.The Federal Reserve reversed course this year after inflation spiked, making the price of food, fuel, housing and other essentials a dominant economic concern. The central bank has bumped up its benchmark interest rate three times in 2022 and signalled that four more increases are pending.So we see that market is cooling in certain areas of the the US but does this mean it is slowing down ? Well it depends how you look at things.Ralph DiBugnara president of Home Qualified, stated “The summer market will stay mostly high because of an increased urgency to buy,” he says. “This urgency is spurred by fears of further rising rates and more homes coming to market, due to more sellers wanting to cash in on the equity they’ve gained over the last few years.”Selma Hepp, deputy chief economist for CoreLogic stated “The market will continue to see relatively strong demand from buyers and an elevated rate of home price growth, despite slowing notably from ultra-hot early spring 2022 conditions” Redfin report published this week, which showed nearly 49.9% of home offers written by Redfin agents faced competition on a seasonally adjusted basis in June. as the market slows, home prices aren’t growing at the same rate as they have been but they are not falling either.When a hot housing market cools down a bit, it doesn’t mean home prices are falling (or even going down). It just means they’re growing at a slower rate. In other words, a cooler housing market is actually good news for both buyers and sellers.But no one can say for sure how the housing market will trend in the second half of 2022. How high will mortgage rates go? how much will buyer demand slow down? how many new units will hit the market and will they be enough ? But either way we are all keen to see what changes will take place in the next six months.