Here’s What Experts Predict
Today’s hot housing market is one of the peculiar outcrops of the pandemic. Housing supply was already low before Covid-19, but it was further hampered as lockdowns took place and people began looking for new homes, driven by a host of reasons—from the desire to leave populated cities to better home offices or just fear of missing out (FOMO).
The Federal Reserve’s steps last year to keep the financial markets liquid and to ensure mortgage rates stayed low have continued. But the low mortgage rates pale in comparison to soaring housing prices in the past year.
Home prices nationwide, including distressed sales, grew by 17.2% in June 2021 compared with June 2020—a record high, according to the latest CoreLogic report. And while there have certainly been hot seller’s markets in the past, none quite compare to the current market where more than 50% of homes for sale have fetched over the asking price.
“We’ve been tracking housing prices for over 20 years, and we’ve never seen anything like this,” says Frank Nothaft, chief economist at CoreLogic.
Historically, the fall ushers in less competition and better deals as children return to school and the holidays overtake schedules. But the pandemic altered that trend last year, and many cities are going through double-digit percentage increases in housing prices.
To get some insight into what prospective buyers and sellers can expect as we enter the midpoint of summer, Forbes Advisor spoke to housing experts across the country to get their forecast on home prices, rates and buyer appetite in the coming months.
Are Home Prices Slowing Down?
While a full-on celebration might be too soon, prospective homebuyers can breathe a little easier, based on predictions from real estate experts. Prices are beginning to decelerate in some areas as more inventory has become available for single-family homes.
According to the National Association of Realtors, unsold homes rose 3.3% to 1.25 million from May to June this year. Although the increase in inventory is not enough to satisfy demand, it might give buyers hope and possibly buying leverage with more options to choose from.
“Mortgage applications have dropped to an 18-month low, and we are seeing some real buyer fatigue in the market,” says Tamar Asken, real estate agent at Avenue 8 in Los Angeles. “Sellers are responding to lower buyer enthusiasm with price reductions.”
In Northern Virginia, home prices were up 10.9% year-over-year (YOY) in June 2021 compared to the same time last year. The more affordable areas of Northern Virginia, like Fairfax City, saw a sharper rise in YOY median home price gains (15.1%) compared to their more expensive nearby areas like Falls Church, which experienced a smaller rise of just 3.2%.
“The market in Northern Virginia has slowed significantly during the past month, with fewer offers and longer days on market,” says Ryan McLaughlin, CEO at the Northern Virginia Association of Realtors (NVAR). “While this would be a normal pattern in a typical year, given the intensity of the spring market, it is surprising. It could well be due to an uptick in travel as pandemic restrictions eased.”
Cape Cod, part of the “Zoom towns” (areas that got popular as more people were able to work from home) housing frenzy that took hold last year, is starting to see a slight reprieve from the hopped-up demand.
Last year, the early pandemic buying spree slashed Cape Cod inventory from approximately 2,300 homes to 230 homes as cities shut down and buyers flocked to the coastal town, says Ken Hager, general manager of Gibson Sotheby’s International Realty on Cape Cod. But Hager says that the market is beginning to normalize.
“Looking ahead, we could see price increases continue on Cape Cod as well as across the country, but at a much slower pace. And prices will likely retreat from panic-buying highs,” Hager says.
However, for some communities, the pandemic gave them a much-needed boost from the lagging price appreciation still leftover from the last housing crisis. Wisconsin, for instance, was slower to recover from the 2008 crash, when foreclosure filings hit a record high of 21.5%.
“In many of our neighborhoods, it took until 2018 to return to those pre-crisis values. Since then, we have seen double-digit appreciation, but it has largely been a reversion to the mean,” says Rick Ruvin, lead partner with the Falk Ruvin Gallagher team at Keller Williams in Milwaukee. “Locally, we are anticipating an evening of the playing field and a return to offers with the typical inspection and financing contingencies.”
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