The market for home buyers has been tricky the past couple years. Home prices have risen because of low inventory. The interest rates, however, have been very favorable and that has made it a very strong seller’s market. Yet, rates have also continued to rise steadily throughout 2018. As always, the market has ways of balancing itself out and we’re starting to see signs of things turning back toward the buyer’s favor.
Effect on Entry-Level Homes
In recent months, the higher-end properties have seen sales slow down and reduced asking prices from sellers. Some economists say that entry-level houses may see a similar trend. As of now, though, most first-time buyers are facing stiff competition for limited inventory. Let’s look at some of the numbers.
Studies show that home-price growth has actually decelerated in 69 of the 100 largest metro areas. In 40 of those 69 markets, homes in the lowest tier of prices (the bottom 20 percent) saw the most significant deceleration in price growth. Those are certainly encouraging signs for people looking to buy entry-level homes. It is important to note, of course, that prices are still going up. It’s just the rate of the price growth that is slowing down.
New Construction Impact
Builders also seem to be making an impact. Affordable new homes for sale (ones that would fall in that entry-level tier) have been a concern. More developers are starting to produce more homes aimed at the first-time buyer. There was a habit of building larger homes after the recession, but we’re starting to see the average square footage come down as builders look to attract more entry-level buyers. New construction in this tier can help add to the inventory and that’s one reason the price growth is decelerating.
“I think this shift will continue,” says Robert Dietz, National Association of Home Builders Chief Economist. “What is going to drive the builder perspective is both the demographics and the fact that more and more millennials are going to be moving into the new-home market.”
Help for First-Time Buyers
Time will tell if this balancing act will continue. History shows it will because the current housing price increases are hard to sustain as mortgage interest rates also steadily rise. We’ll start seeing more inventory and the prices will start to level out. This should be good news for all buyers, but especially good for first-time buyers that are looking to buy in the near future.
If you are looking to buy a home or refinance your current mortgage in San Diego County, Transparent Mortgage is here to help. Give us a call at (619) 929-0199.