If you are looking to purchase a home right now, you may want to wait until the market turns around or find areas that are not in high demand. Currently, we are in the middle of a seller’s market. And it would appear that prices will continue to rise in the coming months.
According to the Commerce Department, new home sales went down by 9.4 percent. This is its lowest level since December of last year and was the largest percentage drop since last August. Applications for a loan to buy a new home were also down. What is hurting the housing market right now is a shortage of properties which is driving the prices higher, making it less affordable for people to buy.
Some have raised concerns that this could be another sign of a new housing bubble. According to CoreLogic’s Market Condition Indicators (MCI), 4 of the 10 major metropolitan areas are overvalued. However, David Blitzer, chairman of the Index Committee at S&P, stated that “price increases vary across the country, unlike the earlier period when rising prices were almost universal.”
According to U.S. News, much of the price gains are being driven by three key cities: Seattle; Portland, Oregon; and San Francisco. All of them have a strong population growth as well as a high supply of rental properties available. In these three cities, owner-occupied homes are low, with San Fran having 36%, Seattle at 46%, and Portland at 52%.
However, according to Frank Martell, president, and CEO of CoreLogic, it would seem that low mortgage rates right now could actually make this seller’s market affordable to some from a month-to-month payment standpoint. However, over the long term, he states that affordability will only become a greater issue until the housing supply challenge gets resolved.
With more would-be buyers falling out of the searches, and houses for sale slowing down, some hope that this will give the market time to cool off. Svenja Gudell, chief economist at Zillow said according to U.S. News, “Demand will fade, builders will begin delivering more new homes and/or more sellers will start coming out of the woodwork. But for the time being, expect this strong sellers’ market to continue.” With interest rates being low, this could be a great opportunity for those already in a home to refinance. But for now, those looking to buy a home will have to wait until the market’s supply troubles get turned around to help bring the prices back down to earth.