Over recent years we have wrote several articles on the US housing market and how the market was viewed as a Sellers market.
This impacted the availability of inventory and we seen price increases across several States in the US, especially on the West Coast.
Now we see something is changing with the market and it looks like we could be entering into a Buyers market, we have seen serval indicators of this in the last few months.
Over recent years we have seen mortgage rates hitting decade’s highs as the Federal Reserve has been hiking up its policy rates. The National Association of Realtors have said it is no surprise that the slow down of the market would be inevitable.
Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting quoted “If we’re right, nationally we’ve already entered the early stages of a buyer’s market. Should supply levels cross above five months we’ll be watching for flat, possibly declining resale prices in some markets, especially where affordability is already very stretched.So the beginnings of the buyer’s market arrived gingerly at around April or May this year based on national numbers.
Goldman Sachs have quoted that the US bank expect prices to decelerate for the remainder of this year and then level off sometime next year, not because demand is falling but because mortgage rates are so high, demand is still very high.
This situation causes a bit of dilemma for US house Buyers as they may predict that prices will fall in the coming months but then again will mortgage rates go up again ? And how sure are we that prices will fall if demand is so high and inventory is still restricted ? The higher mortgage rates have no doubt put added pressure and frustration on Buyers.
On top of increased mortgage rates and uncertainty about the prices, US Buyers are also facing competition from Overseas, buyers from other countries purchased $59 billion worth of US homes in the last 12 months and 44% of them paid in cash and did not need a mortgage.
But if the market is cooling down the plus side for Buyers is that overall it gives them some leverage when it comes to negotiating, multiple bids on the same property is not as common as it was 12 months ago.
According to a 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. That’s the first time the bidding war rate has been below 50% in almost two years.
The only time we really see prices going above the list price is when there are bidding war. Daryl Fairweather, Redfin’s chief economist stated “And we’re back to a place where bidding wars are unusual, not the norm.”
But this does not mean we are going to see a crash, Fitch Ratings Rating Agency have stated “some regional home price corrections” in overheated areas.
“Despite the prospects of a home price correction, Fitch deems a housing market crash akin to the Great Financial Crisis highly unlikely,” the company said. “The main reasons are because housing inventory is still constrained, and existing homeowners who have benefited from low mortgage rates are unlikely to sell their properties.”
Matthew Pointon, senior property economist at Capital Economics, stated in June that he now projects home prices to fall about 5 percent by mid-2023.
So if there is a 5% fall in prices does this mean its a Buyers market, not necessarily but it does mean Buyers are in a stronger position now than they were 12 months ago, there is the possibility of some price negotiating but buyers will need to act when sellers agree to these price reductions as no one knows when this situation can change again.
The other factor is the rental market, if sales slow down that means the rental pool starts to dry up, therefore we could see increased rents in several cities. The prospect of increased rents is attractive to Overseas investors and therefore they start pushing the demand again and also the overall return on investment etc.
The overall consensus you could take is that house prices have pushed the boundaries of affordability but a boom should not end with a bust.
This is a great time to enter US housing market with more properties available than 12 months ago and more realistic pricing.
As you can seed from our pricing Global Investments Inc have already started negotiating and getting sellers down on their prices.
Get in touch now if you would like us to send you our current discounted inventory… Email Invest@globalinvestmentsincorporated.com
