Are homebuyers making moves, or sitting it out? Both narratives take, a new report shows.
According to August data from realtor.com®, there are buyers locking in low mortgage rates today, and buyers delaying due to economic uncertainty.
How do we know? The movement of prices and supply. According to realtor.com, in August, inventory slid 1.8 percent year-over-year—a first in the past year—and the median national price rose 4.9 percent.
However, comparing month-over-month numbers, the median price reversed 1.8 percent—the biggest fall for that period since 2012, and a likely marker of uncertainty.
“The state of the housing market as we head into the latter half of 2019 is a tug of war between increased affordability and economic anxiety,” explains George Ratiu, senior economist at realtor.com. “We’re starting to see this tension play out in our August data. On the one hand, lower interest rates have given buyers more purchasing power, which is contributing to August’s decline in national inventory.”
The average 30-year fixed rate recently sunk to 3.49 percent, according to Freddie Mac—a low not seen since 2016.
“However, concerns over trade wars and cutbacks in corporate spending are causing some buyers to postpone their search,” Ratiu says. “This is contributing to both the slowdown in prices, as well as the inventory decline, as buyers stay put in their current homes.”
Beyond current events, if a downturn hits, 56 percent of buyers could postpone purchasing, according to a recently released separate survey, also from realtor.com. Of those findings, 36 percent of buyers expect a recession in 2020.
“If the headwinds of economic uncertainty intensify, it could prompt a decrease in buyer demand and shift housing inventory’s current trajectory, but if increased purchasing power prevails, we could see even more inventory declines and intensified competition between buyers,” Ratiu says.
In another recently released survey, conducted by Pulsenomics and Zillow, analysts believe construction could stall until 2022, or even later, exacerbating the inventory shortage. In July, housing starts ticked up 0.6 percent year-over-year, the Commerce Department reported—but, in preowned supply, there were 1.6 percent fewer for-sale homes, according to the National Association of REALTORS®.
“The American housing landscape was shaped in a big way by the drive for the classic American dream; swaths of cities were set aside solely for single-family, detached homes, with big minimum lot sizes and slow local review processes,” notes Skylar Olsen, director of Economic Research at Zillow. “Jump ahead three decades and housing affordability is a major issue across the country.”
The affordability challenge hampers millennials significantly. In fact, according to Bankrate findings released this week, 22 percent of millennials “don’t ever think they’ll be able to save enough for a down payment.”
Suzanne De Vita is RISMedia’s online news editor. RISMedia is the residential real estate industry’s definitive source for news and information. Email Suzanne your real estate news ideas at sdevita@rismedia.com.
