Where Is Our Real Estate Market Heading?

    It appears that the real estate market is cooling. Here’s why.
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    Where is the market headed? To answer this, I always look at both local and national trends, and there were a few things that stuck out to me lately that I would like to discuss with you today.

    In 2005 and 2006 when the market was hopping, about 4,800 homes sold in southwest Indiana. In 2009, that number dropped dramatically to under 3,900. As of late, 2016 saw 5,068 home sales and 2017 saw 5,034.

    Sales have been down in 2018 thus far, and based on how many home sales the previous two years had at this time, it looks like we’ll finish this year with about 4,900 home sales. In other words, we are starting to see home sales tick down some, as can be seen in the graph at 1:20.

    The next thing I looked at was the supply of homes. For the last two years, we’ve had a shortage of homes for sale in southwest Indiana and that continues to be the case. However, as of August, we are starting to see an increase annually that hasn’t happened in three years.

    For national trends, I looked at Southern California, which has always set the trend for where the real estate market is headed for the rest of the country. Home sales in California have dropped drastically. In fact, June saw the lowest number of home sales for any month in the last three years, so it appears that the market is cooling off.

    I looked at Southern California to help me predict the national trends since it has always set the trend for the rest of the country.

     

    What’s causing all of this? The main reason is affordability. Interest rates are rising and are currently at about 5% on a 30-year note, much like what was seen in 2009. Last year it was just over 4% and in 2015 it was only about 3.6%. Purchase prices are also affecting affordability. A low inventory of homes means that they are appreciating quickly; the median sale price is actually about 20% higher than what it was three years ago. Combined, these factors are pushing buyers out of the market.

    If you’re a buyer, this is probably welcoming news. We are starting to see fewer multiple offer situations. If you’re a seller, don’t panic. It appears that this is just a cooling down of the market. There’s no substandard lending going on like back in the mid-2000s that pushed the financial market and created foreclosures, ultimately dropping the values.

    However, if you are looking to make a move, I suggest doing it sooner as opposed to later. Also, know that it is going to be extremely important that you find someone who has the marketing resources to get your home sold quickly and for top dollar.

    If you have any questions about this or if you’re interested in speaking about buying or selling, please feel free to reach out to me. I look forward to speaking with you soon.

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