The housing shift has begun. Many called July a ‘lull’ as sales were down but we are seeing it continue over into August. In August of 2015, 1113 homes sold. In August, 2016, 910 sold, giving us 18% less sold homes. July 2015, 1225 homes sold with only 940 selling in July 2016 giving us a 23% less homes that sold. However, the number of listed homes are up! In August, 2015, 1274 homes went onto the market while 1405 homes went onto the market in August 2016, giving us about a 10% increase in inventory compared to last year. Active inventory has jumped to 1.9 months of inventory and the average sales price has jumped from $405k to $450k, almost 10% more!
So what does this mean?
Buyers have a little bit more options. Homes are sitting for weeks, not weekends. You will still find some homes that are getting multiple offers. These are going to be the ones that match a lot of a buyers wants, upgrades, location, etc. However, this is the start of a shift (not a crash). We should start to see the average sales price slowly decrease as sellers start to do price drops more often. However, you will see this happen at a much faster rate when the APR rate goes up and buyers affordability goes down.
Example – If a buyer can afford about $1,571 a month (not including property taxes and we ignore down payment for now), then the bottom would illustrate that at a 1% APR increase would affect the home purchase price by about 10%. Many buyers get stuck on the purchase price but ignore what the monthly payment might be. The part that is subject to the liquidity of the market will be if home prices remain flat and the APR rises or home prices drop by 10% and the APR rises by 1%. If its the latter, then you are not much better off (slightly higher tax deduction on interest).
APR — Home Price
3.5% – $350,000
4.5% – $315,000
5.5% – $283,000