The housing market is showing signs of slowing down, as rising interest rates and low inventory levels continue to weigh on demand. Let’s take a closer look at the problem, what it means for home buyers, and what can be expected of the real estate market going forward.
According to a recent report from Realtor.com, home sales fell 5.4% in June from the previous month. This was the first monthly decline since January 2022. The decline in sales was driven by a number of factors, including rising interest rates and low inventory. The average 30-year fixed-rate mortgage is now at 5.78%, the highest it has been since 2008. This is making it more expensive for people to afford a home, which is leading to a decline in demand.
Low inventory is also a major problem. The number of homes for sale is down 40% from a year ago, and this is making it difficult for buyers to find a home that meets their needs. The combination of rising interest rates and low inventory is making the housing market less affordable and competitive. This is leading to a decline in sales and could eventually lead to a housing market crash, something that real estate professionals have been warning against for several months.
The Realtor.com article also mentions that the housing market's recovery may be unstable and unsustainable due to low inventory levels. The article states that "the lack of inventory is a major headwind for the housing market, and it could lead to a slowdown or even a crash if it's not addressed." The article goes on to say that "there are a number of things that could be done to address the inventory shortage, such as building more homes and making it easier for homeowners to sell their homes. However, it's not clear if these measures will be enough to prevent a housing market crash."
Yet before anyone panics, it is important to note that the housing market is still strong overall, and home prices are still rising. However, the recent decline in sales is a sign that the market is starting to cool down. If interest rates continue to rise and inventory levels remain low, the housing market could eventually crash. This is why it’s crucial to begin preparing for such an eventuality as a “just in case” scenario. Real estate professionals certainly don’t want such a crash to occur, but it’s better to be prepared for an eventuality that doesn’t occur than to be caught unawares! With low inventory levels in the housing market being a major problem that could lead to a slowdown or even a crash in the market, it is important for real estate professionals to make buyers aware of this to prepare them for the challenges that they may face.