Fewer Bidding wars And Increased Housing Inventory
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Kerry Fisher lost at least eight homes in the past four months to faster and more cash-rich buyers.
But recently an agent called her, asking if she was still interested in a home she thought she’d lost. She expects to close on the $195,000 condominium later this month.
“That was different,” says the 41-year-old escrow assistant, who lives in Orange County, Calif., one of the nation’s hottest real estate markets the past year.
Her experience points to a slightly kinder housing market for buyers in parts of the U.S., especially the West, as more homes come on the market, asking prices show signs of slowing and higher interest rates keep more shoppers at home.
“The market has become significantly more balanced,” says Glenn Kelman, CEO of real estate brokerage Redfin. “There just isn’t the madness we saw before.”
Through June this year, U.S. home values gained 10%, CoreLogic says. That’s the fastest pace since 1977, but there are signs that may not last much longer.
Nationwide, asking prices — a leading indicator of sale prices — were up 3.3%, on a seasonally adjusted basis, in May, June and July from the previous three months, according to real estate website Trulia.
That increase is robust, but it’s less than the 4.2% jump that occurred from the three months ended in January vs. the three months ended in April, Trulia says.
In some of the hottest real estate markets, including Las Vegas, San Francisco and Portland, Ore., increases in asking prices have narrowed even more in recent months, Trulia says.
Pending home sales — which typically result in final sales a month or two later — also dipped in June, the National Association of Realtors says. Rising interest rates started to weigh on buyers.
The market’s pace is “a little less frenzied,” says NAR economist Danielle Hale.
FEWER BIDDING WARS
Strong competition for homes has helped drive prices higher. But bidding wars appear to be ebbing as well.
In July, 63% of buyers’ offers on Redfin faced competition in 22 markets coast to coast, its data show. That’s down from 68% in June and the peak of 76% in March.
Some markets saw even bigger monthly drops. Boston fell to 65% of offers in July from 74% in June. San Francisco eased to almost 80% of offers from 90%, Redfin says.
Some of the slowdown is likely seasonal. People go on vacation in July. More inventory also plays a role. Nationwide, the seasonally adjusted inventory of homes for sale was up 6% in June from January, NAR data show.
“There’s been a surge of inventory,” says Robin Kingsbury, agent with Red Oak Realty in the San Francisco Bay Area. “But that means instead of getting 15 offers, you’ll get five to eight.”
Nationwide, the for-sale home inventory was down 5.2% in July from a year ago. That was an improvement from January when it was down 16% year over year, Realtor.com says.
From June, inventory was up 1.4% in July. Some markets, especially in the West, posted bigger monthly gains. San Diego had a 13% jump. Los Angeles and Orange County, where Fisher was shopping, saw inventories rise 8%. Orlando was up 12%.
“Larger inventories, especially in the hotter markets that experienced rapid price increases in the spring, are expanding buyers’ choices and helping to moderate price increases,” says Steve Berkowitz, CEO of Move, which operates Realtor.com.
SLOWING GROWTH IN HOME VALUES
Growth in median home values in some markets has been slowing, says Zillow economist Svenja Gudell.
In Miami, for instance, median home values increased 0.7% in May from April and 0.6% in June from May.
But in the previous five months, values rose at least 1% month to month, Zillow data show.
Values in San Jose, Calif., rose about 1% month to month in May and June. They increased at a 2% plus clip in the three prior months, Zillow says.
Slowing price gains wouldn’t be a bad thing, says John Burns, CEO of John Burns Real Estate Consulting.
Rapid appreciation encourages flipping — when homes are bought and resold in short intervals for fast profits — and pushes home prices into unaffordable territory as wage gains lag.
If prices keep rising as fast as they have been, “It will create a bubble,” Burns says.
Zillow’s panel of 106 economists and real estate experts predicts home values will end this year up 6.7%. Appreciation will slow to 4.4% next year, the panel says.
Kelman even expects prices to flatten or decline in some markets this fall as inventories increase.
“It isn’t just going to be up, up and up,” he says.