According to the latest data, October 2018 represented the third straight month where home price growth slowed down. Most experts expect to see similar results when reviewing the numbers from November and December, as well. The point is prices are still going up along with inflation and other key economic indicators. However, a slow down in what was a very rapid increase in home prices will definitely have some positive relevance for qualified home buyers.
Reasons for the Deceleration
First, let’s look at some of the reasons why home price growth has been decelerating in the past several months. It primarily boils down to a combination of four key factors:
1. Economic Cycle
The economy is always cyclical, and the current cycle is getting mature. This means the demand for buying homes is slowing down some after a major increase following the housing market’s recovery.
2. More Inventory
Housing inventory was historically low. That, in conjunction with home buyer demand and moderate interest rates on mortgage loans, forced the home prices to keep going up rapidly. The inventory is back on the rise now, and that’s affecting the home values.
3. Buyer Cautiousness
Recent factors such as the consistent rises in mortgage rates and the timing of the mid-term elections have made buyers a bit more cautious. Many are taking a “wait and see what happens next” approach. This would likely continue through the holiday season, where there is generally a natural slowdown in the real estate market anyway.
The fact is that home prices have been growing at a much faster rate than the economy’s inflation. Eventually, things have to level out some when homes no longer become affordable.
San Diego Market Impact
Even some of the nation’s hottest housing markets saw a deceleration in the home price growth. This includes right here in San Diego. The silver lining is this deceleration is potentially good news for home buyers who may have been on the fence or were getting priced out of the homes. Still, it is important to note that the data only shows a deceleration in growth. It is not leveling out and prices aren’t likely to go down any time soon. Home prices are still on the rise. They are just not going up as quickly as they had been for the past couple years.
Seizing Your Opportunities
If and when there is another recession, it’s hard to say if home values will start to go down. It’s not likely unless there is a full housing collapse like 2008. As I mentioned, the market is cyclical and tends to even itself out over time. San Diego home buyers on the fence may want to use this opportunity to make their move. Those content to wait it out will have to what the numbers from early 2019 show. I think we’ll continue to see the home prices grow, but at a slower pace. However, mortgage rates are also likely to keep rising.
If you are thinking about buying a home soon, the team at Transparent Mortgage is here to help. Our team can review your situation and see what mortgage loan options are best for you. The economic data will always be going up and down, but there are always mortgage opportunities available when you approach things smartly. For all your Southern California mortgage needs, call Transparent Mortgage at (619) 488-0899.