Sky high home prices, falling homes prices, new construction, no new construction, tax reform, and much more is happening in the bigger real estate market all at the same time. What it means to individuals is always about your location. Although this may seem like times of uncertainty, this is really a normal real estate market. Ultimately, homes prices will continue to rise in general. Much faster in some places than others. And there will be a few isolated regions and local markets where prices will decline because the local economy can no longer support growth. People from these areas will migrate elsewhere to drive up prices in those markets.
Nationally, builders obtained permits in October to build 5.9% more single family homes. Meanwhile, at approximately the same time, permits for condos and apartment buildings fell 17.4% month over month and plummeted 25.3% year over year. Some of this was the impact of the hurricanes in Texas and Florida as contractors shift to rebuilding but the national trend continues dwindling for multiple family construction.
However, even single-family home construction is mixed news when measured by region. October permits in the Northeast fell 26.8% month over month. In the Midwest, permits also dunked 4.1%. But permits were up in the South and the West. Regardless of location, the national median price of a new home (with all brand-new appliances, finishes, and fancy features) is 30.4% more than for existing homes ($319,700 –v- $245,100 in September).
What’s significant about the existing home median price of $245,100 in September is that is represents a 3.2% decline from August when many areas experienced summer bidding wars and constantly escalating prices. Although some sellers continue listing homes at ever higher prices, buyers may have hit a price ceiling because they are actually buying less expensive homes. But many sellers adjusted to this reality as the hot summer market slid into the slower fall market when about 23% fewer existing homes listed at $250,000 and under in September than there were a year earlier (these are selling resulting in fewer on the market), while there were 28.2% more in the $500,000-and-up price range.
Although the tax reform package that is moving towards reality has many negative implications for homeowners, there is a silver lining for those needing a new mortgage. Mortgage rates constantly fluctuate depending on the news of the day. Last week the Federal Open Market Committee announced that they were raising the federal funds rate which caused an anticipatory uptick in mortgage rates. A day earlier, the rate was trending slightly lower after a disappointing Consumer Prices Index. Also in the past week, rates moved slightly lower, despite movement in bond markets that would have suggested otherwise. No one has a clear picture of the long term mortgage rate trend. Currently, experts and analysts are split 30%, 30%, and 40% respectively whether the rate is going up, down, or will remain the same. The good news is that the rate remains at historical lows and very attractive to those looking to either refinance or buy a home (when they can find one they can afford).
Please comment about your local or national real estate real estate market observations and predictions.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.