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Home Prices in Q3 Indicate a Possible Market Cool Down

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As much as we would like to think that home prices began to rise during the pandemic, that is not the case. Pre-pandemic, the demand for homes was already very high, with the supply struggling to keep up for years. When the pandemic hit in 2020, the demand quadrupled, the housing supply shrinking even further.

Incentivized by several factors, such as the record-low interest rates, increased work-from-home opportunities, and the uncertainty caused by the pandemic pushing people to settle down, the market was flooded with new buyers, drying up even the existing inventory.

Last year, the Federal Reserve took steps to keep the financial market liquid by ensuring mortgage rates remained low in 2020 and 2021. Coupled with the supply and demand dynamic, price appreciation went through the roof in double-digits. According to a CoreLogic report, home prices nationally, considering distressed sales, grew by 17.2 percent in June 2021 compared with June 2020.

But with vaccination levels up and the economy in recovery, are home prices dropping? If they are, what does that mean for homebuyers?

Price Deceleration Has Begun

It does not call for a celebration yet, but the tables are turning. For most 0f 2020 and 2021, the housing market has been primarily a seller’s market—with sellers having the upper hand. A market that saw the demand outweigh the supply, leading to bidding wars that resulted in homes selling well above the asking price.

Price deceleration in some parts of the country has begun as more inventory has become available to mark the shift. The rate of price decoration is not uniform, with some areas experiencing it at a faster rate than others.

In Boise and Idaho, where home prices went up by 30 percent in the past year, asking house prices are being slashed, with bidders no longer having to waive inspections to entice sellers.

“You’re seeing the fear of missing out switching from buyers to sellers,” Dominic Zimmer, a realtor, told Bloomberg. “Now sellers are afraid of not scoring the way their neighbors did a year ago.”

 

In metro-cities such as Phoenix, San Diego, Tampa and Florida, they experienced the highest year-over-year gains among 20 cities in August. With Phoenix taking the prize with a 33.3 percent year-over-year price increase, followed by San Diego with 26.2 percent and Tampa with a 25.9 percent increase.

While that data is indicative of a strong market, cracks are forming, and experts predict that prices will continue to decrease.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by a reaction to the Covid pandemic, as potential buyers move from urban apartments to suburban homes,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “August data suggests that the growth in home prices, while still very strong, may be beginning to decelerate.

Across the country, price appreciation slowed down for a second month in September as part of the cool down, Zillow reported.

Price deceleration, however slow, indicates that the housing market boom—fueled by low-interest rates and remote-work moves—is losing intensity. The decrease was more visible in areas far away from major urban hubs where buyers are seeking affordability.

“The markets where we’re seeing the most price cuts were flying a little too close to the sun earlier this year,” said Daryl Fairweather, chief economist for the brokerage Redfin.

Price deceleration may stem from several reasons; increased supply, low mortgage application or buyer fatigue. Whichever the case, homebuyers will face another hurdle in Q4 as mortgage rates begin to rise into next year, affecting home affordability. And while price appreciation is beginning, home prices are still high and well out of many homebuyers’ reach. With that said, first-time homebuyers should pull all the stops and buy now when mortgage rates are low. If they cannot come up with down payment and closing costs, they should check out Golden State Realty for down payment assistance programs.

Homebuyers looking to settle in the Southern Carolina region should contact our real estate agents, with years of experience servicing the different areas in Southern Carolina; Fontana, Riverside, Irvine, Corona and Atlanta at www.thepowerisnow.com.

 

About Eric Frazier:

Eric Lawrence Frazier is President and CEO of the Power Is Now Inc. The Power Is Now is a multimedia company specializing in real estate and mortgage education for consumers and real estate professionals on various topics in real estate, lending, economics, and government policy since September 1, 2009. The financial and real estate information is distributed through BlogTalkRadio, iTunes, TuneIn, and other online radio platforms nationwide, as well as online T.V. and eMagazines. Connect with Eric Frazier DRE 01143484 | NMLS 461807 | Office: 800-401-8994 x 703 | Direct: 714-361-2105 and start your real estate investment journey or homeownership in safe hands.

About the Power Is Now Media

The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, headquartered in Riverside, California. We advocate for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities.  The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com

 

Eric Lawrence Frazier, MBA.
President and Founder,
The Power Is Now Media

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