Substantial price jumps are unlikely
As more inventory hits the housing market and buyers rebel against rising home prices, the real estate market is likely to shift from seller dominance to one that is more counterbalanced by buyer reluctance to acquire homes deemed too expensive.
The tighter inventory conditions of this recent spring and summer are going away as the spring months of next year start to approach, analysts say. Right now, builders are trying to make up for a lack of inventory with new homes, Lawrence Yun, chief economist for the National Association of Realtors, claimed.
According to the latest Home Price Index report fromCoreLogic, home prices, including distressed sales, increased by only 0.2% in October when compared to September.
“In October, the year-over-year appreciation rate remained strong, but the month-over-month appreciation rate was barely positive, indicating that house price appreciation has slowed as expected for the winter,” said Mark Fleming, chief economist for CoreLogic.
“Based on our pending HPI, the monthly growth rate is expected to moderate even further in November and December. The slowdown in price appreciation is positive for the housing market as almost half the states are now within 10% of their respective historical price peaks,” Fleming said.
The report comes with both good and bad news. It is good news certainly for the owners and home sellers who are getting the appreciation and housing equity increases, in addition to helping the economy in terms of consumer spending, Yun explained.
However, the report is not as positive for homebuyers. “There are still in my view a lot of potential homebuyers getting blocked out from buying due to rising home prices,” Yun said.
He added, “It is a clear signal that sellers cannot keep jacking up the prices since there is a lack of buyers. More housing inventory is coming into the market from new home construction, but it is still a sluggish pace.”
If prices increase, homebuyers may choose to step out of the market if sellers do not adjust their list prices.
Home prices, including distressed sales, increased 12.5% annually in October, marking the 20th consecutive monthly year-over-year increase in home prices.
“In terms of home price appreciation, the housing market appears to be catching its breath as we head into the final months of 2013,” said Anand Nallathambi, president and CEO of CoreLogic.
“The deceleration in month-on-month trends was anticipated as strong gains in home prices over the spring and summer slow in line with normal seasonal patterns and the impact of higher mortgage interest rates,” Nallathambi added.
Heading into 2014, sellers are still in fairly good shape with prices edging up, but they don’t have that much further to rise, CoreLogic suggests.