The forecast for the coming months is lower temperatures—and a cooler real estate market, if only by a few degrees.
The housing market is expected to shift to something closer to normal this fall, real estate experts say. They anticipate more homes will go up for sale, helping to slow down the unparalleled price increases and bidding wars of the past year.
But the market is likely to remain highly competitive, as there will still be many more buyers than homes to go around.
We’re going to exhaust the pool of buyers who are still sitting on a lot of cash looking to buy their next home. The market does not have a magical way of sustaining this past spring and summer’s pace [of price growth], because you’re going to run out of people who can afford it.
However, that doesn’t mean that home prices, like Bend’s median list price hit an all-time high of nearly $700k, this summer, will fall very much. In fact, average prices increase about 8.6% year to year.
The shift in the housing market will make shopping for a home a lot more tolerable than it has been, because consumers will actually have time to properly think through their decision and won’t be in as fierce if there is a bidding wars. Going into fall, buyers will not need to pull out all the stops to win a house, like removing the inspection contingency or waiving the appraisal contingency.
More homes are expected to go up for sale in the second half of the year. The influx won’t be nearly enough to put a dent in the overall housing shortage that’s the main reason for the record prices, but it may help curb the price growth.
Rural properties usually cool down first in our area and we are seeing that now with over a months inventory in most areas.
The overall market is predicted to stay very strong because eemand is still going to be well in excess of supply. It just won’t be as frantic as what was experienced earlier in the year.
NAR’s director of housing and commercial research, Gay Cororaton says “We’re seeing the gap narrowing between demand and supply, But it isn’t going to even out anytime soon. There’s still a huge, huge gap.”
The fall homebuying season is likely to be busier than usual
Demand is likely to stay strong as well—even though many buyers are frustrated or simply priced out. More millennials are hitting their prime homebuying years, and builders have been unable to ramp up construction to keep up with the growing population. With rental prices also hitting new heights, many people are seeing that it’s cheaper to buy than to continue to lease a home.
Plus, mortgage interest rates are still hovering around record lows. The fear of missing out on what could be a once-in-a-lifetime deal will likely entice additional buyers. (Rates averaged 2.87% for 30-year fixed-rate mortgages
And not every home will be affected by a fall slowdown.
Don’t expect phenomenal deals in the fall if you are house hunting in the most desirable part of a market or competing for a particularly nice house. Homes that stand out for one reason or another are still flying off the shelf.
But overall, most buyers may not be as willing to pay top dollar and waive inspections and contingencies for less-than-spectacular homes that would have sold for $100,000 less just a year ago. There aren’t many regular people (as opposed to investors) who can pay all cash for a home. And there likely aren’t as many remote workers fleeing expensive cities and heading for cheaper parts of the country at this point in the pandemic as there were in the beginning.
We are definitely shifting from an extreme excess of demand to a more moderate excess of demand, But it’s still going to be a seller’s market.
In addition, many first-time buyers can’t afford to pay over the list price of a home if it doesn’t appraise for that much. They don’t have the extra cash to make up the difference.
The emergence of the delta variant is also spooking some buyers who worry about the stability of their jobs.
This could help to explain why the number of purchase mortgages (which don’t include refinances) dropped this last month, according to the most recent Mortgage Bankers Association data.
The market “will be nothing like the panic we saw” going into last year. It already is returning to normal.
Foreclosures likely won’t play a big part in the cooling market
Many folks have been anticipating a wave of foreclosures to sweep the country as moratoriums to protect struggling homeowners expire. However, it’s not expected to be nearly as severe as what happened during the Great Recession, or lead to an influx of homes going on the market.
Homeowners who haven’t made mortgage payments during the pandemic make up just a fraction of the housing stock—just 3.26% of mortgages were in forbearance as of Aug. 8, according to the most recent data from the Mortgage Bankers Association. Many of these people are expected to resume payments or work something out with their lenders.
Those homeowners who can’t resume their monthly payments and have enough equity in their properties can avoid foreclosure by putting their homes on the market. With prices at these levels, they may even walk away with a profit, and it won’t damage their credit.
Really the middle-class and the upper-income groups won’t even notice the wave of foreclosures because it won’t be in their neighborhoods. Lower-income homeowners who lost their jobs during the pandemic and don’t have much equity will likely be the ones who go into foreclosure. Their homes are expected to be in the lower-third price tier.
The number of foreclosures and how quickly they go up for sale are expected to vary from state to state. Some states have protections in place for homeowners that can delay proceedings significantly and Oregon is one of those.
Some first-time buyers will scoop up these properties as the previous owners are forced back into the rental market. But the bulk are expected to go to investors with the cash to close quickly.
Investors are expected to keep home prices strong. During the pandemic, more institutional investors, such as pension funds and financial firms, have bought up single-family homes to turn them into rentals. Many can buy in bulk and pay in cash. That’s likely to continue.