While inventory on the housing market is still at historic lows, they have reached the highest they have been so far in 2023. While there are 10% less houses on the market compared to this time last year, current inventory is now 1% higher than it was just one week ago.
The Altos Rule
This arises in the face of still rising interest rates, which are expected to raise rates. This is according to the Altos rule.
To understand the future of housing inventory in this country remember the Altos Rule. The Altos rule says that the more available inventory of homes to buy is the result of higher mortgage rates. If rates climb, so does inventory. If rates fall, inventory will fall.Housing Wire
Summer is known for raising inventory, which usually peaks in August, but which is now expected to grow until September. There are now just under 500,000 single family homes on the open market. Houses on the open market is raising at a faster rate than it was at this time last year.
There are now just under 365,000 homes under contract. This flies in the face of interest rates that are the highest they’ve been in twenty years.
Current Market Prices
Even in the face of rising interest rates, home prices are still rising. In fact, housing prices are still rising in 99 of the 100 biggest markets.
But, 35% of homes on the market have seen price reductions since being listed. So, even though prices are rising, in many cases they are not rising at the pace sellers hope they are.
And we can see it in the home price reduction data too. Price reductions are about to inch above 2018 and 2019 again. 35.5% of the homes on the market have had price reductions. Price cuts always tick up late in the summer, and this year’s seasonal increase is speeding up just a bit with the recent higher mortgage rates. Each week we have slightly fewer buyers, making slightly fewer offers, so slightly more sellers cut their asking prices.Housing Wire
First Time Home Buyers
So, as we stand in the face of rising interest rates, there are some positives. Negatively affected are younger, first time home buyers, who are increasingly being priced out of the market.
During the 2007 crash, many first time home buyers felt compelled to buy their home before prices rose even higher. This led to many foreclosures among that group. With record high home prices, it remains to be seen if that will happen again, or if potential first time home buyers will just stay out of the housing market.
Since, historically, real estate has been one of the best investments, the pressure of rising housing prices may negatively affect this group, and the larger market, in the long run.
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