In the last few weeks, we’ve seen a lot of news stories about home prices losing their upward momentum in some U.S. cities. The word “momentum” is in many of these articles because prices aren’t falling in most of those cities, they just aren’t increasing as fast anymore. People are wondering if these changes are random noise or the beginning of fundamental changes in home prices in those cities. Let’s review what people are saying about home price trends in the United States.
Internationally, home prices are actually falling in Toronto, Vancouver, Sydney, and Melbourne. None of those four cities saw much of a real estate bust during the Great Recession and their home prices took off again during the economic recovery that followed. Their home prices ended up being way out of line and seem to have topped out and started to fall.
Single-family home prices are lower now than a year ago in those cities even though their national economies are booming. The big worry is if prices are weakening now when their economies are strong, what happens to home prices if a recession hits in the next 2 or 3 years? Without support from growing national economies, could home prices fall significantly and turn a normal recession into another mega-recession?
In the United States, home prices are still increasing but after our unbelievable real estate bust 10 years ago, many people are hypervigilant, looking out for any early warning signs of changes that might suggest that the U.S. real estate market is peaking.
The number of homes listed for sale this July versus last July was up in these metro areas, according to Realtor.com.
Increase in Number Of Homes For Sale
July 2017-July 2018
- +44% in San Jose
- +29% in Seattle
- +19% in Portland
- +18% in San Diego
- +15% in Dallas
While the inventory of homes for sale was increasing in some of the hottest markets, inventory was finally tightening up in some weaker markets like Indianapolis and Milwaukee.
Looking just at California, the median home sold price was up 8.5% (June 2017 to June 2018), to $602,760, which is very strong. But the number of homes sold was down 7.3%, despite an increase in the number of homes listed for sale, up 8.1%.
The real estate industry has been saying home sales have been low because of low inventory, not because of high home prices. In California in June, however, the number of homes sold decreased even though the inventory of homes for sale increased. Maybe high prices have been the culprit all along. California Association of Realtors President Steve White seems to agree: “The lackluster spring homebuying season could be a sign of waning buyer interest as endlessly rising home prices and buyer fatigue adversely affected pent-up demand.”
The hottest U.S. real estate market for price increases the last 2 years has been Seattle. That’s changing this summer. According to the Seattle Times, the median home sold price in King County was only up 6.3% (July 2017 to July 2018), to $699,000. The number of homes sold in July was the lowest for a July since 2012. Unexpectedly, the number of single-family homes listed for sale in King County increased 44% from July 2017 to July 2018.
Nationally, the U.S. real estate market may not be peaking—but it’s looking like some of the hottest markets are certainly losing their upward price momentum.
# # #