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The market might be skewing back to “normal.”
The housing market looks to be facing new headwinds. A new report is showing that the “late spring buyer’s rush” has slowed down significantly.
According to the National Association of Realtors’ Pending Home Sales report, pending home sales in June decreased by 5.4 percent month-over-month and came in near flat at a 0.3 percent increase year-over-year. NAR noted that all four regions of the U.S. saw month-over-month declines, but the Northeast and Midwest saw slight increases of 2.2 percent and 0.3 percent, respectively, month-over-month.
“The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers,” said NAR Chief Economist Dr. Lawrence Yun in a release. “However, job gains can help support housing demand.”
Early last month, Brad Case, chief residential economist at Homes.com, told Inc. that geopolitical tension and cost inflation scared traditional buyers, creating a late spring home-buying boom. Home sales in the U.S. declined in April, which is typically a great season for the housing market. The conflict between Iran and the U.S. started on February 28. Now, in the midst of diplomatic negotiations and a post-home-buying push, the housing market seems to be returning to its traditional cycle.
“It is worth emphasizing that it is closing activity, not contract signings, that generates economic impact,” said Yun. “Pending contracts are only suggestive of upcoming closed deals and do not align perfectly, due to fallout rates and contract contingencies.”
Harsh competition
Compared with data from Redfin, a real estate brokerage platform, the market is still improving but no longer booming even after the recent surge in housing market growth. According to Redfin’s recent housing market report, pending sales rose 0.5 percent month-over-month and existing-home sales rose just 0.1 percent from May to June. The data still saw relatively healthy sales across the country, but noted major declines from four states: Nebraska, New York, Michigan, and Georgia.
“In Northern Michigan, the decline in sales is being driven more by affordability and limited movement within the market than by a lack of interest in homeownership,” Tommy Corbett, Executive Director of REMAX Bayshore and Partner of Brick & Corbett, told Inc. “Demand has softened, but it hasn’t disappeared.”
According to Redfin data, Michigan saw a 1.5 percent decrease in home sales year-over-year. The Michigan-based realtor noted that buyers are being challenged by higher prices and mortgage rates. Possible homeowners who could have comfortably qualified a few years ago are now postponing their plans, adjusting their price range, or continuing to rent.
“Buyers are still willing to act when the right home becomes available, particularly in desirable areas near Traverse City, downtown, or the water,” said Corbett, who expects to see a seasonal increase in activity through July and into August.
Much like Michigan, Georgia homebuyers are also dealing with inflated prices and harsh mortgage rates. “Affordability for Georgians has definitely hampered options, especially for first-time home buyers,” Lisa Harris, Associate at REMAX Center in Braselton, Georgia, told Inc. According to Redfin, Georgia saw a 2.6 percent decrease in home sales year-over-year.
“Today’s buyers are no longer emotional. They are mathematical,” said Harris. The U.S. sunbelt has seen a recent temperamental swing, with its current population timidly competing with relocators who are actively seeking lower prices compared to northern states. This will further shift housing demand as the market looks to stabilize, and buyers hope to jump in. “Rates have ticked back up due to renewed macroeconomic and international frictions. So sellers must be overachievers… The market always rewards preparation and strategy,” says Harris.
This post originally appeared at inc.com.
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