It looks like the recent shakeup of housing strategies and policies is finally taking its toll on Americans. In fact, housing demand experienced its biggest percentage decline since April 2016. This is according to a survey carried out by Redfin, which shows that demand dropped by 9.6% between June 2017 and June 2018. Additionally, the number of people making inquiries about homes available for purchase fell by 6.1% in the same period.
A disinterested consumer base
Redfin noted that the major reasons for such a notable decline are surging purchasing fees, high-interest rates slapped on mortgages, student loan debts, and relatively lower listings when it comes to the entry level. Such factors have rendered buyers virtually penniless; especially in an economy that seems to be backtracking rather than moving forward. In turn, a market stalemate has surfaced whereby interest rates continue to rise as purchasing power dwindles.
It seems as if homebuyers have lost confidence in the economy, in turn resulting in a notable decrease in the number of home purchases being made. Additionally, the number of offers being made for homes has decreased as well
So it’s no surprise that the number of offers made on homes has declined by 15%; specifically in popular metropolitan areas.
Though real estate contractors themselves have not been severely affected, it is worth noting that the number of homes constructed and put up for sale experienced a slight dip. According to Redfin’s index, the number of homes put up for sale had dropped by 3.8% annually, with new price listings declining by 1.6%
A surprising shift for Supply-Starved Areas
While there was an overall decline in supply, Redfin’s index notes that areas traditionally regarded as ‘supply-starved areas’ actually experienced a surge in listings! In fact, the likes of Washington D.C. and Seattle recorded double-digit increases, which is no doubt startling. However, both areas still experienced a decrease in demand.
Head of analytics at Redfin, Pete Ziemkiewicz, says that the unfolding of such events could be that as the number of houses increases in the market, buyers are becoming more selective about their home purchases. Looking to only make offers to homes which they feel are well priced.
In fact, buyers in areas such as Seattle are going as far as targeting offer contingencies like the performance of an inspection intact; an event that has rarely been seen in the past couple of years.
Home buyers have become increasingly selective with their purchasing options, looking to study the market intensively before selecting a specific house to purchase
Reduction in bidding wars
Moreover, according to data collected by CoreLogic, Southern California real estate agents recorded a significant drop in the number of home sales during the month of June. Additionally, they was also a decrease in the frequency of bidding wars between potential house buyers in the area.
That’s because, with a wider selection of homes currently present in the market, the need for aggressive bidding has reduced drastically. Though home prices are still increasing, it is at a much slower rate than was anticipated.
In other areas where home prices did not increase rapidly, there was an increase in demand. These include areas such as Atlanta and Chicago; despite them also recording a notable reduction in the supply of homes.
Conclusively, the results affirm that the current stalemate in the real estate sector is costing both real estate moguls and potential home buyers alike. Only time will tell how the sector will shape up for months to come.