Housing Market Update – October 2018
Now just entering fall, it has been an eventful year so far, especially for the housing market. There should be nobody stating that it’s a “hot” seller’s market….anywhere. The “seller’s” market really had a significant run to the tune of almost 5 1/2 years. Here in California this housing market run brought property sale prices to an all time high and in some areas to unprecedented levels.
Beginning early spring, slowly price reductions started to appear. Inventory has tripled what it was at the beginning of the year. The housing market eventually shifts to maintain balance. Prices ARE coming down to a more relative “fair market value“, which is determined by the buyer. How far they come down will be relative to how far they were overpriced. Between an increase in inventory and the market change, prices will definitely adjust down.
Where is the Truth??
There is so much information put out in the media about what the market is doing. Where it is going and what is causing it. Getting information from leading economists, real estate investors, commercial agents and venture capitalists, help gauge the market. Finding the truth is a collaboration of many pieces of information.
What Investors are Doing
While many investors are selling off portfolios as they have captured their return, many sellers are doing the same. Values at this time may have reached their peak and many want to cash in. While that is in the wind, many buyers are holding off on purchasing, waiting to see how the market continues to evolve.
Fears of another 2008 crisis seem to loom for many as that was their most recent memory of a “huge” market shift. Market changes are quite normal. With all factors considered, both economically and financially, there is no precedence for a 2008 downturn and the mortgage industry, though parameters for lending have started to loosen up, it is still heavily regulated.
What to Consider
The one thing to keep in mind as the market continues to shift is to keep an eye on the interest rate, i.e., the cost of borrowing money. People typically focus on the home prices. Consideration of the interest rate and just how much the overall cost will be on a mortgage should also be a factor. Buyers waiting for prices to adjust will also be welcoming interest rates in the 5% range by the end of this year. To keep inflation at bay, the rates are predicted to continue to slowly rise.
Doing the Math
When you do the math, even buying at a lower price with a higher rate, you will pay much more in the long run. Purchasing now and obtaining a lower rate on your mortgage, you will recover any modest adjustment down in the price, especially if you are going to stay in the home 5 years or longer.
Heading into 2019
This year will definitely end differently than it started. The economy at this time still holds strong. Impending tariffs are looming and we will see the wake of that decision. The current bull market (longest in history now being 9 years old) is still holding strong and overall steady growth in the stock market YTD points to some evidence of strong economy.
Hang on For the Ride
Just because the housing market has shifted doesn’t mean everything is going to fall apart. Each area has to be considered independently and realize when one aspect changes our entire economic system is NOT going to collapse like a house of cards. Though the housing market has changed, it will eventually settle. It is all about the balance of the economy, our reaction to it and finally settling in to the new mind set.
This market update is written by Holly Young
Current “market updates” on this page will be updated the beginning of each month.