26 Jul Transitioning Markets: Stable or Increasing?

In 2016, it seems the stars have been aligned perfectly for the housing market with low inventory, good buyer demand, time of year and low interest rates. Most market areas have seen these factors transition into rising home prices. Moreover, since Brexit, if rates weren’t low already, there has been further downward pressure on interest rates. The question on my mind as we enter mid-summer, as well as likely agents, buyers and sellers, is if prices can continue to trend upward within segmented markets, and if so, how much further? Further, at what point does buyer affordability level off?

What is Recent Data Suggesting- Increasing or Stable?

Typically when running data, the trend whether it be upward, downward, or stable will at times begin to fluctuate/border between two given a good sample size of data. Last month, I spoke about the importance of identifying trends within trends which is the ground work to identify if a market is increasing, stable or declining. Very recently, when running 3 month increments of data, various segmented markets that have been increasing are seemingly leveling off and/or fluctuating between trending upward and stabilizing.  I am not suggesting all markets are now “stable,” but there are signs that prices in some market areas are seemingly leveling off after increasing in 2016 so far.

What to Watch?

Time of year- We are entering mid to late summer. If the market does cool down a bit, is it reflective of more the time of year (late summer) or other factors? A seasonal summer slowdown is generally typical as families are enjoying summer, vacationing, school starting around the corner, etc. But other factors could be influencing the market as we transition from summer to fall.

Ratio of active listings vs. pending sales- While many areas have a shortage of homes available, watch the number of pending sales vs. active listings. This can help suggest where the market is heading.

Days on market- Take a look at days on market of not only active listings and pending sales, but closed sales. This may be helpful to identify if the market is slowing down and indicate if prices will soon follow this trend.

Closed sale data- The closed sale data always lags what is currently happening in the real estate market at this moment. For example, the closed sales in June/July are reflective of contract dates likely 30-60 days before close of escrow. The market could be shifting direction and the closed sales may not reflect this movement. That further illustrates why paying attention to the above factors can be very helpful.

I hope the above helps give an overview of some factors to watch and consider as summer begins to wind down.

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.  This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non real estate purpose. This appraiser is NOT a qualified home inspector and any tips are for informative purposes only. If you’d like to obtain and order an appraisal for your specific needs, please contact Bryan at 530-878-1688 for more information.