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Are We About to See a Buyer’s Market?

Harrison Stowe
2 min read
Are We About to See a Buyer’s Market?

A nationwide jump in home sales has been arguably the greatest driving of health in the property sector, with the late 2012 turnaround continuing on the strength of new closings. As a nationally comprehensive statistic, most analytics firms reported a quarter-over-quarter climb in the rate of purchase. While values continued to climb and home purchases sustained at a promising rate, this boom in purchase rates seemed to decelerate some by the close of Q3.

Taking all this into account, a recent USA Today story notes that we may quickly see a shift from a seller’s market to one more favorable to buyers. As a general timeframe, most realtors seemed to be reporting a slowdown in sales around the close of summer. While this is seasonally typical, it also seems bolstered by a variety of other factors.

Chief among them seems to be the decline in affordability. As the USA Today story reported, prices have risen so drastically that they are rendering purchase unfeasible for a large portion of potential buyers. Citing figures from the National Association of Home Builders, the USA Today report states that only 69.3% of market-ready homes were affordable to families earning the median national income. This is a marked drop from the 73.7% rate recorded at the close of Q1, and the first time this figure has dipped below 70% since 2008.

To circle back to a spread of other relevant statistics, home prices in August increased on a year-over-year basis for the 18th consecutive month. Price gains posted a full 12.4% nationally average rise above August 2012, and literally every state in the Union posted a year-over-year increase in August. In tandem with this, it appears that agents and realtors widely predict home prices to rise much reduced rates throughout the upcoming months.

So What About Buyers?

Depending on economic performance through Q1 2014, we might see an evening off (or gentle decrease), in home prices. The impacts from this are multifaceted, but not necessarily negative. The combination of elevated prices and climbing interest rates have caused certain homebuyers to shy away from closing on new property, which might cause problems for property investors and those holding real-estate backed funds.

However, it could also cause a general easing in property values, which might result in decreases that are gentle enough to encourage shy buyers back to the field. This pattern could ultimately mark the beginning of stability in the housing sector. If gradual rises and stabilizations in real estate values match similar inclinations among buyers, then we could see the housing market reach that fabled plateau. Considering how wary many prospective buyers have been about a second bubble, seeing value gains curb could be the incentive conservative speculators need.

Related: Images_of_Money

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.