“Homebuyers and sellers are remaining cautious and taking a pause as price appreciation continues to rise.”
Two in every three homeowners need to sell their existing home in order to purchase a new one. This is causing homeowners to put off listing their homes at all. According to CoreLogic’s Home Price Insights report, over a third of recent buyers reported using funds from a home sale to finance the down payment on their current home. CoreLogic analysts believe homeowners may be holding off listing their homes with the hope that prices will continue to rise. This strategy will enable them to garner more money toward the down payment.
According to President and CEO of CoreLogic Frank Martell, “Homebuyers and sellers are remaining cautious and taking a pause as price appreciation continues to rise.” He added that homeowners think they will get greater returns on their investment and have an easier time making their next home purchase.
How Long Will Prices Keep Rising?
By this logic, homeowners would sell their properties at the height of the market and buy their next home as the market cools in order to maximize their ability to buy. Home prices increased nationwide in August 2018 year-over-year but are beginning to level off. Prices are likely to fall month-over-month as Fall continues, making this strategy a fine line to walk. When the additional factor of rising interest rates comes into play, homeowners who opted to put off listing in hot markets may have waited too long.
“The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home,” observed CoreLogic Chief Economist Frank Nothaft. “We expect appreciation to slow further in the coming year,” he added.
Realtor.com Chief Economist Danielle Hale noted her data indicates inventories are heading for growth in the coming months. “After years of record-breaking inventory declines, September’s almost-flat inventory signals a big change in the real estate market,” Hale said. She added, however, that there are still “plenty of buyers in the market scooping up homes as soon as they’re listed,” so inventory volumes will likely remain low overall. Recently, listings rose by 8 percent nationally.
Where is the Inventory Growing?
Large cities with hot housing markets are the most likely to show larger gains in inventory in the near future. The top five markets for listing growth in September were:
- San Jose
- San Diego
- San Francisco
All five markets currently have increased listing volumes that are 30 percent or higher than last year’s listing volume. In San Jose, the active listings today are double what they were this time last year.