Buyers and sellers have been forced to adjust quickly to changing dynamics in the recovering U.S. housing markets, such as bidding wars when prices were low, short inventory, rising mortgage rates, and financing issues. A research firm notes that in a typical recovery sales pick up and then prices follow, but the current recovery has experienced the opposite. The Wall Street Journal notes there are four key factors to observe related to affordability, inventory, bubbles, and investors as the market rebounds.
Making sense of the story
- Housing affordability was impacted in a relatively short span. Builders capitalized on rising demand and low interest rates while adding little in the way of new construction, which some experts say has led consumers to experience sticker shock.
- Depressed inventory is a key factor because demand is only part of the equation. The supply of homes for sale is below the already-depressed levels of one year ago, despite the number of listings in August being up by 20 percent from the beginning of the year.
- Demand exceeds supply in the vast majority of the nation’s 20 top markets, according to data tracked by John Burns Real Estate Consulting.
- Home prices have risen around 12 percent nationally, which far surpasses the one percent growth in incomes. Bubble talk has been fueled by a growth rate seen as too high and unsustainable.
- The Journal notes, “As rising prices ease investors out of more markets, there will be less competition for some homes, slowing the pace at which prices are going up.
- With interest rates rising, it will be important to watch whether owner-occupant, mortgage-dependent buyers will pick up the slack from investors who ease out of markets. Employment figures will also be key to revealing how quickly housing heals.