Tuesday, July 25, 2017
By Jonathan Gunnels
Homes Sales Take a Dip This Summer

     There has been a recent slump in home sales.  The surprising culprit is robust demand coupled with a supply shortage.  This usually is a great sign for home sellers, but not so in June.  While nationwide year over year home sales number show an increase, the month of June has been down nationwide.  I believe that there are 2  "triggers" for this dip on overall sales, the increase in rates and the overall increase in prices.

     The FOMC, or Federal Open Market Committee, is charged with the duty of overseeing the the market.  When they meet, they often make decisions about interest rates.  As of late, they have been on the rise.  If you have been in the market for a new home over the past year, then know what I am talking about.  With each interest rate hike, the pool of qualified buyers goes down.  This, in turn, slows down the market.  In their defense, there are signs of a hot real estate market that may need a cool down period.  Housing inventories are down to a 4.3 month supply.  This is about a 7% decrease in overall housing supply.  In addition, prices are up 6.5% from a year ago.  

     As briefly stated earlier, housing prices have been on a tear lately.  When price increases outpace wage growth, then affordability becomes an issue.  While many buyers are considering longer commutes in order to deal with rising prices, many others simply decide not to buy.  The price increases are mainly a function of low supply.  This presents an opportunity for builders to meet this demand.  The question will be whether the price will be right for the buyer.

     In closing, I would like to say that the housing market is doing fine.  This momentary slump in sales is just a blip in the yearly growth.  Sales will continue to be steady provided that the interest rates do not continue to rise.  The overall market sales will taper off a bit giving the housing community time to adjust.  Builders will continue to build, and this will ease the shortage.  In the short run, this is a wonderful time to sell, and to buy.  Sellers can take advantage of the inventory shortage of nice homes to get a quicker sale.  Buyers can look forward to a positive outlook on pricing for the foreseeable future.