The U.S. home sales market witnessed a major slump in the month of August as investors were seen withdrawing from the market. This raised a concern amongst experts regarding the future of the market.
In fact, according to the National Association of Realtors, the sales of pre-owned properties saw a downward trend, falling 1.8% in July with a yearly rate of 5.05 million, putting an end to the four consecutive months of increases. In addition the rate of sales fell down by 5.3%, when compared to previous year.
The decline is a direct effect of investors making less purchases. Last month the share of overall investor sales had fallen to 12%, which is indeed the lowest since 2009. In fact, 23% of the purchases were made by investors in the first half of 2012, and most of the properties were bought at bargain rates in foreclosure. This means the difference between the percentages of investor sales in August vs 2012 is almost half!
From 2012 to the beginning of 2013 there was a decent growth in homes sales. However this growth was short lived as mortgage rates crept up as well as home prices This year, the industry managed to regain its foothold, due to sudden job growth and decline in interest rates. Moreover, the mortgage rates have been steady around 4% during the entire summer, the lowest level in history…then they jumped to 4.23% just a few days ago.
It is expected the Fed will taper its bond-buying program in upcoming months which will raise short-term interest rates. It is speculated that the overall interest rates in the market would rise.
According to a recent Monday report, the tight inventory might be weighing on the sales. In fact, the for-sale homes figure has grown 4.5% to 2.31 million as of August. However, if we take historical figures into account, this figure is quite low. According to experts, several potential buyers wish for more options available in the market prior to signing up a contract.
However, if we consider the present rate, it might take about 5 to 6 months for the homes-for-sale supply to exhaust.
Home prices are undergoing a moderate upward trend, where the median sale price for a property in previous month was approx. $219,000, i.e. 4.8% up than previous year.
In conclusion, seeing the market leveling off is a healthy sign. As long as interest rates remain relatively low, affordability will not erode too much. Many Sellers are not in tune with the market and have priced their homes at unrealistic prices in anticipation of the gains seen in 2013. Analyzing signals like these indicate it’s a great time to put your house on the market, however you’ll be better served to price within 2-5% of recent comparable sales.
Contact us for a free, Accurate pricing analysis on your property to see if now is the right time for you to sell.