According to national housing experts, the spring housing market will likely be the indicator for 2018 regarding whether the market is heading into a slowdown. According to the National Association of Realtors (NAR), about 40 percent of the entire year’s sales during a typical year happen from March through June. In January of this year, existing home sales fell dramatically, as did pending home sales. While this was likely due in large part to tight inventory and median home prices rising 5.8 percent over January 2017, overall market conditions could be heading toward much lower home sales volumes, one of the traditional measures for market heat.
Lawrence Yun, chief economist for the NAR, forecast that home sales would be “mostly flat this spring and for most of 2018 compared to a year ago.” He credited ongoing inventory shortages and housing affordability concerns paired with rising mortgage rates for the cooling market conditions. Yun also cautioned that 2017’s year-end tax reform bill could affect housing markets where home prices are relatively high and property taxes are similarly high, although he told Think Realty he thought a “wait and see” approach would be best on that topic.
At time of publication, mortgage rates were the highest since the start of 2017 at 4.46 percent for a 30-year fixed-rate mortgage. Because tight inventory is driving at least some of the cooling action, homeowners and other parties hoping to sell for top dollar may enjoy benefits of a sellers’ market including waived contingencies and other concessions from buyers. They may also find some buyers are not fully qualified to pay their offer prices, even if they have a mortgage preapproval letter. Kristin Weekley, a realtor with Laer Realty Partners in Boston, Massachusetts, observed that in her market, the heat is still on and, with it, all the typical characteristics of a sellers’ market.
“Our lack of inventory is causing auction-like conditions [which are driving prices up even higher] and hysteria,” she observed.
Investor Insight: In some areas of the country, the spring housing market might be a little softer than expected. National analysts are pointing to these conditions as the bellwether for a housing slow-down, but local market performance will vary widely across the spectrum, as always.
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