The global real estate market will grow to approximately $4.3 trillion by 2025. Despite this prediction of upward growth, the industry isn’t without challenges. So evident are the issues that the market has been seen to be changing in the recent past.
Investors have to stay up-to-date with the current trends for the sake of remaining afloat. The indicators of a changing market also inform sellers and renters about the prices. Real estate professionals have keenly observed some pointers of a changing market as follows.
1. Higher Inventory Levels
The inventory levels in the real estate market are highly significant indicators of the changing market trends. They have an impact on the supply and demand equation for both buyers and sellers. When there are many housing options available for homebuyers, they’re in a better purchasing position.
When there aren’t enough listings to go round, buyers have to compete against each other fiercely. Keep tabs on the increased housing stock and look for signs of increased availability.
2. Declining Profits for Sellers
According to a report compiled by Attom Data for the first quarter of 2019, sellers made an average profit of 84%. Had they sold their properties a year earlier, they’d had realized a gain of 103%. In the hottest real estate markets, the average profits slipped by almost 20% yet had peaked by 114% in 2018.
3. Interest Rate Stabilization
In the past year, real estate professionals have witnessed some volatility with interest rates. A large percentage of buyers exited the market. This was influenced by the lower interest rates on their mortgages than they’d be able to secure on new purchase loans.
For those downsizing, it means they won’t be able to realize the full benefit of the move. This is because the new purchasing cost will be more than the cost of their existing loans.
The higher interest rates also curtailed buyers who wished to move up.
In the first quarter of 2019, the trends in the market indicated a decline in the rates. The hints point to a more temperate climate in the foreseeable future. As a result of the stabilization of the tariffs, there’s been a spike in purchase activities.
4. Tough Bidding Wars
Bidding wars are another indicator of the changing real estate market. In San Francisco, for example, nearly 25% of all home-purchase offers faced stiff competition. Nationwide, this rate stood at 15%.
However, this figure is a decline from 60% in April 2018. Right now, the market is as good as it can get for buyers who want to avoid price escalations and bidding wars. Many forces are at play, and they may lure buyers back into the market.
If this happens, there’ll be more competition soon. The interest rates are low compared to last year. Wages are growing, and price growth has stalled or fallen in some markets.
According to a Redfin agent, multiple offers will be on the rise again son. As it is, most move-n ready single-family properties are already getting four or five offers. Homes priced below the recent sale prices are getting close to 10 offers.
5. Decreased Home Value Growth
One way to spot the changes in the real estate market is to track the average price changes. It’s crucial to note whether the home values are increasing or decreasing, and the rate of the changes. According to a Zillow report, home value growth is slowing in about 50% of the largest U.S metros. However, the share of more expensive homes available for sale at a discount is growing.
As a stakeholder in the real estate market, you can track these price changes through the Federal Housing Agency. It provides wealth pricing information through the Housing Price Index and published quarterly and monthly reports.
The real estate industry is one where staying up-to-date is crucial for success. Understanding the trends is crucial for sellers and renters alike to enable them to decide on prices. It also informs the buyers’ mindset.
Some of the factors that are currently influencing the real estate market include high inventory levels. It means that there are many properties listed for sale on the market. This has led to fierce bidding wars and decreased home value growth.