This might sound like a contradiction to some people: in July, home sales across the country fell. But at the same time, home prices went up, and housing market analysts are predicting a very robust fall season.
How can sales be falling if the housing market is so healthy?
That’s because the drop in sales didn’t reflect of a lack of interest among buyers — far from it. The main reason was lack of inventory. There simply have not been enough homes on the market all year to meet the sky-high demand among prospective buyers.
And that’s why predictions are that the housing market will continue to heat up this fall, well into the holiday season. There are no signs on the horizon that buyers are pulling away from the housing market.
That’s also why home prices are still rising, and why any prospective buyer sitting on the fence should be concerned that if they wait, prices will only inch farther out of range of what they can afford.
Are there any signs of lower demand?
U.S. home resales fell in July to an 11-month low, which caught many market analysts by surprise. However, the key factor causing sales to drop — a shortage of properties for sale — also sent prices higher.
In fact, for the first time in this nation’s history, the average home in the United States is now worth more than $200,000. The national median home value rose 7.5 percent in the past year to $200,400, according to real estate site Zillow.
But at the same time, Zillow reported that there are 11 percent fewer homes on the market today than a year ago, which marks the largest drop in inventory in four years.
The National Association of Realtors reported that even as existing home sales fell 1.3 percent in July, sales rose 2.1 percent compared to the same time period in 2016. So on a year-on-year basis, the housing market has been getting stronger.
There’s been speculation that one of the chief reasons why inventory is so low is that during the last housing market collapse, inventors rushed in and bought up many distressed homes that were facing foreclosure. Today, those homes are being rented and inventors seem to be in no rush to put those homes back on the market.
Many of those investors may believe they can afford to wait and see if prices continue to accelerate.
So why is a housing market low on inventory performing so well? One answer: a healthy economy is keeping it in great shape.
How is the economy impacting the housing market?
The slowdown in sales, most analysts agree, doesn’t reflect an ebbing demand among buyers. Buyer demand is being fueled by a strong labor market, with the unemployment rate at a low of 4.4 percent nationally, and more than 100,000 jobs being created each month.
A strong economy is having a similar effect in Florida. While sales dropped nationally in July, Florida’s housing market moved in the other direction that month, with more closed sales, higher median prices, and an increase in pending sales, according to data released by Florida Realtors.
Sales of single-family homes statewide were up 2 percent compared to July 2016, and the association reported that homes continue to sell quickly. Pending sales for single-family homes in Florida were up 3.3 percent in July.
The statewide median sales price for single-family existing homes in Florida was also higher than the national average. It was $240,000 in July, which represents a 7.1 percent increase from the previous year.
And if the national economy is strong, Florida’s looks to be on steroids. The Sunshine State’s rate of employment growth has been outpacing the national average all year. As more and more people relocate to Florida to take advantage of the healthy job market, that’s driving the number of people looking to buy a home to sky-high levels.
Where is the housing market headed in the fall?
Housing market analysts say a key sign of the future isn’t whether sales dropped or if inventory stays low, but where prices are headed. Since home price gains were strong in July, that means buyer demand is very high as well.
Real estate data provider CoreLogic reported that the national home price index rose by 6.7 percent this summer compared to a year ago.
As a result, CoreLogic is now forecasting a 5 percent price growth rate in the next year. CoreLogic’s deputy chief economist Sam Khater has called this the “pressure cooker effect” — where prices soar as buyer demand stays high and inventory remains lean.
The bottom line is that as long as the economy is booming, the number of prospective home buyers will go up as well. Prices seem virtually certain to rise as well, so buyers have few if any incentives to postpone their search for a home. It’s only going to get more expensive in the coming months.
Once upon a time, the housing market had strong buying seasons, like the summer months, and then sales tended to cool off a bit in the fall. A lot of families wanted to be in their new home before the school semester began.
Today, a booming job market and low unemployment rate have changed all that. Now buyers are moving swiftly when a new home lands on the market, and they try to act fast knowing other prospective buyers are doing the same. What season it is doesn’t matter much anymore.
It can be challenging competing in a Seller’s Market, but there are ways of providing yourself with some advantages. One is to find a trusted and reliable home builder like AV Homes, and learn more about the houses they’re building in Central Florida.
The properties that AV Homes constructs are designed specifically to meet your needs, but more importantly, you’re going to experience a true sense of community living there. At AV Homes, we understand that people are not just looking for a house to live in, but to be in a neighborhood they love and care deeply about.
AV Homes constructs homes in communities that are close to Orlando and the many jobs being created there, and to the popular theme parks. At the same time, these beautiful homes are located in quiet communities that are tranquil and serene.
Call us today at 1-800-AVHOMES to learn more about the homes we build and the communities we construct them in.