Why The Housing Market is Slumping Despite a Booming Economy
Have you seen the recent headlines about what’s happening in the U.S. Housing market? Here’s a few:
- House Price Growth alls to Lowest Level Since May 2013
- Housing Market Falters Despite Strong Economy
- Housing Market Slows as Prices and Rates Rise
- The Housing Market is Cooling Off
- Trouble ahead for the Housing Market
That’s the picture of what’s happening in our national real estate market. But, what’s happening in our Austin, Texas market? Where are we?
3 Stages of a Housing Bubble
I recently read an article about the 3 stages of a housing bubble. Namely, Mania, Peak, and Bust.
Stage One: Mania
Mania occurs when prices are rapidly rising, loans are easy to get, and mortgage rates are attractive. That’s where we were in the Austin real estate market over the recent years of 2013 through 2016. House price appreciation was going up 6% each year. We kept hearing experts say that pace was unsustainable.
So now we are seeing a shift. For example, mortgage rates a year ago were under 3.5%. Now they are 4.25% to 5.0%. Price appreciation has definitely slowed.
So, we are beyond the mania stage of a housing bubble.
Next: Peak
During this stage nervous owners attempt to sell before the party ends. Inventory jumps and prices begin to stagnate. We are seeing that happen now in our Austin housing market. In 2013 we saw a low of only 6,297 listings in our local Multiple Listing Service. This month we have 9,235 listings. That’s a whopping 47% increase.
Inventory is up and price appreciation is about half of what it was in recent years.
Finally: Bust
In this stage inventory builds and sellers start having to lower prices. And, I have to tell you, I’m seeing a lot of expired listings. I’m seeing a lot of price reductions. I’m seeing homes purchased in 2016 that cannot attract buyers even at the same price it was purchased.
This can become a vicious cycle as buyers sit on the sidelines waiting for prices to fall even more which cause to drop prices further.
Are we here in Austin in a housing bubble? I don’t really think “bubble” is the appropriate word, but the housing market always goes through a cycle of a Seller’s Market to a Balanced Market to a Buyer’s Market.
We are shifting from a Seller’s Market towards a Buyer’s Market. We are not there yet, but we are going to see slower price appreciation. It’s going to take longer to get a home sold. We’ll see more price reductions and more expired listings.
I’ve been practicing real estate since 1995 so let me say this. If you absolutely need to get your home sold in today’s market be sure to work with an experienced, knowledgeable agent who has the expertise to help you get top dollar.
