Housing Market Numbers are In & My Advice
Usually there is a correlation between stock price growth/economic growth and home sales because consumers have more confidence & more money, however, 78 straight months of annual home price gains along with rising mortgage rates have made homes less affordable. Depending on the area and statistics, some home sellers will have to price their homes lower than expected! Much better then having it sit on the market and get a lower price then it would have if it was priced correctly.
"Existing home sales fell in August from a year earlier, the sixth straight month of declines. Economists said that low inventory, rising home prices and higher mortgage rates continue to pressure the housing market.
The upper end of the housing market—where many buyers have benefited from the stock market’s gains—remains strong, with nearly 12% growth in single-family home sales over $1 million and nearly 9% growth in sales from $750,000 to $1 million. In contrast, sales of single-family homes priced below $100,000 fell about 12%, and sales from $100,000 to $250,000 fell roughly 2%, according to NAR."- Laura Kusisto and Sharon Nunn
In addition, its been ten years since the Great Recession and during the recession the Federal Reserve implemented quantitative easing to help the economy get out of recession. Since 2015, the Fed funds rate has been rising (Federal Funds Rate are currently around 2%-2.25% & may rise another 25 basis points in December 2018). Should inflation continue to rise and the Fed continues to raise interest rates, then economic growth can come to an end.
Also keep in mind that mortgage rates are rising which diminishes a home buyers purchasing power. The yield on the 10 year treasury yield has a direct relationship on mortgage rates so the higher the yield, the higher the mortgage rate. Regarding the luxury housing market, where the most new construction has taken place, could become more impacted as rising interest rates push buyers toward lower price points. This is why there have been more home price reductions. More details on the housing market can be found here.
According to Laura, “Home-price growth has slowed for the last several months and is expected to continue slowing as mortgage rates rise. The volume of existing home sales has fallen compared to a year earlier for six straight months. In August, the three-month moving average of new single-family homes built was just over 860,000, down from nearly 900,000 at the beginning of the year. There are a number of reasons to believe this shift will persist. Mortgage rates have risen about a percentage point over the past year, pinching demand for homes. Rising prices have squeezed affordability. In addition, the tax law passed in December reduced homeownership incentives, foreign buyers have pulled back, and ample supply of rental apartments has made buying less urgent for many.”