6 Early Indicators Of A Real Estate Market Slowdown

Dated: August 22 2018

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Any seasoned REALTOR®, knows that the real estate market fluctuates all the time, going up or down depending on a number of factors. But when a market truly falls, there is generally a backlog of inventory driving prices down and making the sales process much, much longer. Over the last few years our real estate market has experienced a healthy growing market, with steady increasing home prices and dwindling days on market before a contract is accepted, often at or above asking price.

If you have sold a home in the last three years your experience is most likely a positive one, your home in many, many cases sold for more and faster than you expected. The process in general was probably easy and trouble free, as mortgage lenders have leveraged technology to enhance and speed the mortgage closing. 

However, over the last few months our market has starting showing signs of a small slowdown as we're seeing Days on Market Increase and Many More Price Reductions on our Local Multiple Listing Service. The shortage of inventory has been pivotal in creating this Seller's Market over the last three years. Due to this lack of inventory Home Builders have filled the gap, with hundreds of new homes throughout our county and construction is still strong. And while this is a great alternative to home buyers, many homes coming now on the market have to compete with these brand new homes, usually with only a small difference in price, making the new builds a better option than a resale home with decade or two in age.

Unfortunately, many folks are repeating the mistakes home buyers and many investors fell into, in 2010-2014, waiting to "gauge the market", back then home buyers and investors were waiting for the market to hit bottom, well, many of them missed that milestone and I'm afraid many potential home sellers are making the same mistake, on waiting for prices to keep going up before deciding to place their home on the market. Most likely when they do decide to list their home, inventory will be back up, buyer interest would have dwindled, placing downward pressure on pricing and increasing Days on Market. If you are in this group waiting longer, may end up costing you thousands of dollars. 

Here are six very early indicators that a healthy market is about to see a downturn, according to experts.

1. INCREASING INVENTORY LEVELS: When a market starts a cool down, the first thing you will see is more homes on the market, and longer sell times for them.A lot of new development hitting the market at the same time can be a sign that the market is getting toward its peak, all that new inventory will weigh down the market as there’s more choice and purchasers become more discerning...sales slow down,  inventory builds and price growth comes to a standstill.

2. PRICES START A DOWNWARD TREND: The number of Price Reductions in you local area are another great indicator of a market that's starting to slow down. However in our area, I believe, prices will see a slowdown and even maybe a small downward price adjustment as our inventory levels have been so constrained for so long. 

3. BUYER FATIGUE: In spite of a strong jobs market, the maturing of millennials, the increase in international buyers in Florida. Existing-home sales, which make up about 90% of the market, fell for a third straight month in June to an annual pace of 5.38 million units, according to the National Association of Realtors. And new residential construction, or housing starts, softened in June to an annual rate of 1.17 million units, according to the Census Bureau. In March, starts were at an annual rate of 1.33 million. Most economists caution against drawing broad conclusions from monthly housing data, as this is volatile and often revised, however for several months now the trend of many key indicators has been downward.

4. LACK OF HOUSING AFFORDABILITY: 2018 Has marked the worst housing affordability rate in more than a decade, as home prices have increased significantly over the last three to five years, wages unfortunately are not keeping up. Denying many first time home buyers their dream of home ownership

5. RISE OF INTEREST RATES: A continued upswing in mortgage interest rates is likely to affect current and would-be homeowners, diminishing mortgage affordability in many markets and complicating the financial decision on when or whether to move to a different home or purchase your first home. As this along with lack of inventory and lack of affordability make a perfect recipe for a market slow down.

6. THE ECONOMY IN GENERAL AND THE STOCK MARKET: I'm sure this one goes without saying. However, new government policies both domestic and international have a deep impact in our local real estate market. Did you know that foreign buyers purchased over $24.6 Billion in Florida real estate in 2017? The stock market as we know can have cataclysmic  effects on the economy as a whole. 

If you have been thinking about selling your home, we will be happy to provide you with a free consultation, price analysis as well as a detailed marketing plan for your home. We specialize in achieving our customers goals when selling a home, both in terms as well as pricing. Send us an email or click here for a free and instant report on sales in your neighborhood. 

Housing market shows signs of cracking. Here's why from CNBC.

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Manuel Quiros

My name is Manny Quiros, I’m a real estate professional in the “Disney Area”, I have lived in this area since 1999 and have called this area my home and place my wife and I to raise our three wo....

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