As prospective homebuyers navigate the tumultuous waters of the real estate market, the question on many minds is whether the housing market is cooling off. In 2020, the housing market experienced unprecedented shifts as mortgage lenders reacted to the economic crisis spurred by the pandemic. The resulting surge in buyer demand created a market that has yet to return to a semblance of normalcy.
1. Homes Are Sitting on the Market for Longer
The duration a home spends on the market serves as a crucial indicator of buyer demand. In the heyday of 3% mortgage rates, homes were snatched up within weeks of being listed, signaling a red-hot market. However, in the current landscape, the housing market may be showing signs of moderation. If homes are lingering on the market for extended periods, it suggests that buyer demand is not as fervent.
If you’re considering entering the real estate market, collaborating with a local agent becomes invaluable. Their ability to track and analyze data, including the number of days homes stay on the market, empowers you to make informed decisions about the optimal time to make a purchase.
2. Inventory Is Growing
As of late September 2023, the National Association of Realtors reported a 3.4-month supply of available homes nationally, falling below the four- to six-month range typically needed to satisfy buyer demand. Low inventory levels signify active buyers swiftly securing properties. Conversely, an increase in available inventory indicates a potential decline in buyer demand.
For a comprehensive understanding of your local housing market, closely monitor real estate inventory trends. Observing an uptick in available properties signals an opportune moment to explore and make offers on different homes.
3. Home Prices Are Dropping
The dynamics of home pricing serve as a barometer for market conditions. Sellers can command high prices when buyers are eager and willing to pay. However, a decline in home prices suggests a cooling market, indicating a reluctance among buyers to make swift offers on available properties. If you witness a downward trend in prices, it might be the right time for you to enter the market.
It’s worth noting that mortgage rates, while influential, may not definitively indicate a heated or cooling housing market. Despite strong buyer demand in 2021, interest rates remained low throughout the year. To strategically time your home search, focus on the aforementioned factors rather than relying solely on mortgage rate fluctuations.
Final Considerations: Whether the Housing Market is Cooling or Not
The decision to buy a home involves more than just securing a favorable mortgage rate. While interest rates can fluctuate and present opportunities for refinancing, the purchase price of a home is a fixed aspect. Therefore, it’s crucial to stay attuned to market signals to ideally make a purchase that aligns with your financial goals.
For prospective buyers, waiting for the housing market to cool off may prove beneficial. By closely monitoring the duration homes spend on the market, tracking inventory levels, and observing price trends, you can position yourself to make a well-informed and financially sound decision in the ever-evolving landscape of the real estate market.