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The Martin Group of Realtors®
Local Expertise • Global Reach
+1-561-339-1779
The Martin Group of Realtors®
Local Expertise • Global Reach
+1-561-339-1779
The weather forecast for the coming months is lower temperatures—and a cooler real estate market, if only by a few degrees.
Experts at the National Association of Realtors® say that the housing market is expected to shift to something that is closer to normal this fall. They anticipate more homes will go up for sale, helping to slow down the unparalleled price increases and bidding wars of the past year.
But the market is likely to remain highly competitive, as there will still be many more buyers than homes to go around.
The pool of buyers, who are still sitting on a lot of cash looking to buy their next home, will likely be exhausted. The market does not have a magical way of sustaining this pace of price growth that we have seen earlier in 2022, because there are less people who can afford the higher prices.
However, that doesn’t mean that home prices, whose national median hit an all-time high of $385,000 in the week ending August 14, will fall. In fact, nationally prices increased 8.6% year over year that week. But that’s significantly less than the 17.2% annual rise in April. Going into the end of the year, prices may rise a more modest 5% to 6%, says the Senior Economist at Realtor.com®, George Ratiu.1
Hopefully, consumers won’t be in those competitive bidding wars this fall. However, buyers will need to be ready to purchase by having cash for having pre-approval letters from their loan originator.
More homes are expected to go up for sale in the second half of the year. This won’t be nearly enough to put a dent in the dire housing shortage that’s the main reason for the record prices, but it may help curb the wild price growth.
“It’s still going to be a very strong housing market. Demand is still going to be well in excess of supply,” says Greg McBride, chief financial analyst at Bankrate.com. “It just won’t be as frantic as what had been experienced earlier in the year.”2
One thing that won’t return to usual is the pace of sales. Usually, the market begins slowing down and prices sometimes dip in the fall. In former years families preferred to get settled before the school year began. But this year, the COVID-19 pandemic threw off the normal timing of the school year’s starting date. Therefore housing market activity is expected to stay brisk through the fall.
In south Florida, we are expecting an unusually busy fall season. Most homeowners now feel comfortable allowing real estate agents to have open houses, although the delta variant of the coronavirus could change this.
We still need more sellers listing their homes in the real estate market to have a full recovery to a “normal” housing market.
Demand is likely to stay strong as well, even though many buyers are frustrated by simply being priced out of the market. More millennials are hitting their prime homebuying years and builders have been unable to ramp up construction to keep up with the growing population.
With rental prices also hitting new heights, many people are seeing that it’s cheaper to buy than to continue to lease a home. Plus, mortgage interest rates are still hovering around record lows.
The fear of missing out on what could be a once-in-a-lifetime deal will likely entice additional buyers. Rates averaged 2.87% for 30-year fixed-rate mortgages in the week ending September 2nd, according to Freddie Mac data.3
Not every home will be affected by a slowdown. Don’t expect deals in the fall if you are house hunting in the most desirable part of a market or competing for a particularly nice house. Homes that stand out for one reason or another are still selling quickly in south Florida.
But overall, most buyers may not be as willing to pay top dollar for less-than-spectacular homes that would have sold for $100,000 less just a year ago.
There aren’t many regular people (as opposed to investors) who can pay all cash for a home. And there likely aren’t as many remote workers fleeing expensive cities and heading for cheaper parts of the country at this point in the pandemic as there were in the beginning of this year.
We are definitely shifting from an extreme excess of demand to a more moderate excess of demand. But it’s still going to be a seller’s market.
In addition, many first-time buyers can’t afford to pay over the list price of a home if it doesn’t appraise for that much. They don’t have the extra cash to make up the difference.
Many folks have been anticipating a wave of foreclosures to sweep the country as moratoriums to protect struggling homeowners expire. However, it’s not expected to be nearly as severe as what happened during the Recession nor lead to an influx of homes going on the market.
Homeowners who haven’t made mortgage payments during the pandemic make up just a fraction of the housing stock—just 3.26% of mortgages were in forbearance as of August 8, 2022 according to the most recent data from the Mortgage Bankers Association.4
Many of these folks will resume payments or work something out with their lenders. Some of these homes will hit the market in the next several months.
Homeowners who can’t resume their monthly payments and have enough equity in their properties can avoid foreclosure by putting their homes on the market. With sold home prices at today’s levels, they may even walk away with a profit and not damage their credit.
Generally the middle-class and the upper-income groups won’t even notice the wave of foreclosures because it won’t be in their neighborhoods.
Lower-income homeowners, who lost their jobs during the pandemic and don’t have much equity, will likely be the ones who go into foreclosure. Their homes are expected to be in the lower-third price range.
Some first-time home buyers may scoop up these properties as the previous owners are forced back into the rental market.
Investors are expected to keep home prices strong. During the pandemic, more institutional investors, such as pension funds and financial firms, and foreign investors have bought up single-family homes to turn them into rentals.
Many investors can buy in bulk and pay in cash. That’s likely to continue, which will lower the homeownership rate a little as these houses become rental units.
Sources:
Martin Group of Realtors®
Premier Brokers International
9123 N Military Trail #104
Palm Beach Gardens, FL 33410
Team Office: 561-339-1779
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