Is the Housing Market Cooling Down?
And if it is...what does that mean for buyers?
Those who have been tracking the housing market cycle over the last eighteen months have been on a roller coaster ride of historically low loan rates, spiking home values and drastically low inventory. Now, it feels as though the housing market is cooling off, leaving many hopeful homebuyers wondering: is it currently a buyer’s or seller’s market?
Rising Inventory
Between June and July of 2021, the standing inventory of homes on the market rose by 7.3%. However, that inventory level still sits lower than last year’s by 12%. While a balanced home market sits at a six-month supply of available homes, that metric currently comes in at 2.6 months. In short, the gap between supply and demand is steadily closing...but it’s most definitely still there.
Improvements for Buyers
Even that small increase in standing inventory may help with housing affordability for potential buyers. When there are more available homes to choose from, there’s less competition among buyers and therefore less need for sky-high offers or inspection concessions that can be financially risky. The degree of urgency for buyers looks to be leveling out, so fewer buyers are getting themselves into a financially unstable position through their efforts to outbid others and land a home (even one that doesn’t meet their needs).
Since mid-2020, demand for housing has simply soared, and when the number of buyers in a market increases without the inventory increasing to match, prices spike. Due to material costs and the uncertainty that came with the pandemic, new homes haven’t been built nearly quickly enough to keep up with demand. Now, with steadily-decreasing demand, home prices are expected to continue to get more reasonable.
Interest Rates
Especially since 2020, it’s become astonishingly clear that mortgage rates play a large role in the real estate market cycle. Although they’ve fluctuated a bit since 2020, leaving people questioning when mortgage rates will go down again, they’ve continued to return to relatively low rates. These fluctuations and the slight rise in interest rates since the peak of the pandemic have contributed to the recent slowdown in demand, while the still-low rates will help buyers afford better homes.
Predictions
Real estate experts predict a steady decrease in home prices in the last few months of 2021. Citing buyer fatigue, a decrease in demand, falling numbers of mortgage applications, and fewer “panic-buys,” experts see an ease in pressure on the horizon for buyers.
Does this mean we’re heading into a buyer’s market? Not necessarily, and especially not in the so-called “Zoom cities” that have exploded in popularity with the rise in remote work. Desirable areas like North Carolina are still seeing a boost compared to their normal housing market behavior, making it tough to land an existing home.
Because of the mismatch between inventory and demand, many are choosing to build their own homes in North Carolina. They’re met with perks like avoiding bidding wars, staying in control of their budget, and choosing their preferred features for their home up-front instead of requiring additional budget for renovations down the line. While the custom homebuilding process used to entail an unmanageable amount of back and forth and logistical involvement, it’s never been more streamlined than it is with Atmos.
Manage everything in one place as you build your custom dream home with Atmos. Get started today!
