Double-digit increases can’t last forever – but could home prices plateau for years? It will probably depend on mortgage rates, and having enough reasonable sellers who are willing to take the same $ as what the last guy got.
From our friends at JBREC:
Price appreciation has slowed across every major housing market, in what we are coining the Great Price Deceleration.
The biggest deceleration occurred in San Jose: Last year, resale prices in San Jose were up 20% YOY! Today, prices are down 6% YOY—a deceleration of 26%. Last year, San Jose was frenzied with less than one month of supply and very strong job growth. Builders were selling homes faster than they could build them. In the second half of 2018, the San Jose market slowed substantially due to affordability issues, but conditions have stabilized this year.
Top California markets, Seattle, and Las Vegas have experienced the most price deceleration. Home buyer affordability remains weak, even with historically low 4% mortgage rates, and homes are sitting on the market longer (especially higher-priced homes). We are seeing more buyer demand in markets such as Seattle, where home builders have adjusted prices.
Markets in the Southeast, Midwest, and Northeast have been far less frenzied this cycle and have had much steadier prices. These markets are typically lower risk in their fundamentals (more affordable, less risk of oversupply, and steady job growth). Raleigh-Durham has experienced the least deceleration in price from last year. Resale prices gained 7% YOY last year, and today they are up 6%, a 1% price deceleration.
Nationally, we expect resale prices to gain 2% through 2022, cumulatively, but there are huge disparities by region and metro.
We explore all top housing markets each month in our Regional Analysis and Forecast report for our paying research clients. If you are interested in becoming a research client, please reach out to our team of expert analysts.
Rich’s latest graphs are out, and this inventory history above shows how relatively few homes are for sale locally.
The median detached-home list price for the county today is $849,000!
He did mention a reader’s theory that in the era of online search portals, the inventory has become more efficient. Better-educated buyers are making faster decisions these days, which keeps the inventory counts down. But the hot buys have always sold quickly, and the over-abundance of data could be dumbing down the decision-making.
He mentioned the slightly-negative turn in pricing last month, but I like these two graphs above. The pricing trend is going to bounce around – as long as we have sales counts close to previous years, we’ll be fine.
Here are graphs from one of the more bullish real estate prognosticators:
Steve is a residential real estate expert who specializes in market trends. He has been in the industry for over 25 years, first as an agent and then developing his own 500-agent real estate firm. Steve now helps producers achieve their true potential. He authors a monthly informational presentation for top professionals titled, “Keeping Current Matters” (also known as KCM), and is seen as a leading industry thought leader.
The worrisome spike last month did flatten out, but it does make you wonder if we should adjust our sights.
I agree with Rich that the months of active inventory will probably be rising from now on. But if the coastal market had 3 or 4 months of active inventory, it wouldn’t be a bad thing. Rancho Santa Fe is 7+ and doing fine.
This is the Deputy Chief Economist at Freddie Mac:
It is incredible to see the trend change in every category around 2016 – as if there was a societal shift that gave permission to get back in the game.
Maybe that’s when the Bank of Mom and Dad kicked in, and their distribution of wealth made it possible to buy even though prices were soaring?
Or the resurgence from lower-end buyers enabled the move-up market?
We have dispatched the lightweights around the Bay Area and have now passed those pesky VenCo guys, so only one more town in our way – Los Angeles!
We can do this! Keep being less-affordable San Diego!
The NAR didn’t list the criteria they used to create this graphic, so I’m not sure what we need to do to win, except tell your friends and family to move to Ohio or Scranton, PA?
But seriously. We’re America’s Finest City (though New York City is in the running – wow!). Shouldn’t more rich people be moving here to retire? And fewer retirees be willing to leave?
In a downturn, our housing market could survive better than other cities just because of the retiree influence.
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