San Antonio Market Slowdown

Hi again! You may have been hearing about an impending real estate market slowdown lately, so today we’re going to dissect the issue and look at it critically. Watch the video below or read on to get the latest on this market slowdown.

A Note About Sources

When doing my market analyses, I always use reliable sources whose assessments are based on real data. Especially as an investor, you never want to go off what some guru or famous person is saying without investigating it. If you google “real estate market slowdown,” you’re going to get all kinds of crazy stuff.

I want to look into what the facts are and what conclusions we can draw from actual data. I’ve pulled a lot of very good, reliable, and well-cited articles. I’ll include the source links so you can see them for yourself, as well.

Zillow

Zillow, one of the nation’s leading tools for real estate marketing, recently reported on national real estate trends and a possible slowdown in their Real Estate Market Pulse. They reported phenomenal year-over-year home value increases nationwide, with an average of 17.7% growth (as measured by their Zillow Home Value Index). This kind of growth is stunning. However, we are noticing that month-to-month growth is starting to slow down. They also point to an increase in days on market, which means homes are taking just a bit longer to sell. It is important to note that the data is showing that the market is still incredibly strong and we are still seeing phenomenal growth, but that it is just starting to slow down a little bit.

Fortune

Lance Lambert of Fortune discusses the future of home prices in the recent publication Where Home Prices Are Going Next, According to Forecast Models. I like his articles because he cites his sources very well. Lambert points out that the housing inventory has gone up almost 30%, as buyers begin to become more concerned about high prices and sellers are listing more to avoid missing out on a deal. It is still a seller’s market but has recently moved toward the buyer’s favor.

He points to a few different forecast models, which tell us that the market should still continue to grow, but at a much slower rate. CoreLogic projects a 2.7% growth over the next 12 months, while John Burns Real Estate Consulting and Freddie Mac predict 4% and 5.3% respectively in 2022. This is a SIGNIFICANT slowdown, but it is still positive. I haven’t seen any data firms predicting prices going down.

This chart represents the slowing of appreciation over the past month or two. I like that he included this to put the slowdown into perspective. It looks like it going back to the normal amount of growth we’ve seen in years past.

CoreLogic

This graph represents CoreLogic’s forecast for the next 12 months. We’re currently seeing 18% year-over-year growth, and they’re predicting 2.7% growth over the next 12 months.

What About Homeowners Exiting Forebearance?

Another thing to keep in mind over the next few months as we watch the market is that there are a number of homeowners who are coming out of forbearance. If you remember, congress passed this forbearance law during COVID that made mortgage companies have to allow forbearance while the country was in lockdown. Many of these forbearance terms are coming to an end, and a lot of people have been trying to predict what will happen when they end. Will we suddenly see a crash or a flood of homes on the market?

Zillow has predicted that 25% of homeowners exiting forbearance will list their homes for sale, based on previous data of homeowners exiting forbearance. The largest wave of forbearance exits are expected in September and October of 2021, so we should see the housing supply increasing now.

If 25% of people who are in forbearance list their home, the market can absorb this. It is a good thing and will help by putting more inventory back on the market. If it gets closer to 50% of people deciding to list, it may affect the market negatively.

This graph demonstrates the projected monthly exits from mortgage forbearance. The most homeowners exited forbearance in September, so now is the time we would be seeing them listing their homes if they are going to do so. It will be really interesting to see what happens over the next few months, as the number of people exiting forbearance will gradually decrease.

We don’t have a really good idea of how the homeowners in forbearance stand. Many of them could have been making payments all along and applied for forbearance just in case. This is going to factor in quite a bit, as well.

Conclusions

Most of the data and experts are saying that the market is definitely slowing down, but that it is slowing down to a more normal, positive pace. We have seen such a wildly hot market for the past year, that returning to a moderate level of growth seems like a major slowdown.

If you’re a seller, it is important to look at these figures and understand that buyers will not pay such high prices anymore. Just because you have seen the prices increase so much over the past few months, doesn’t mean it will happen now. If I had a new listing, I would recommend pricing it a bit under or lower on the range of list prices, so that we can capitalize on the fact that buyers are a little more skeptical.

If you’re a buyer, don’t overpay and don’t feel stressed like you have to go in and offer way over the asking price. I think buyers will be able to relax a little bit and get a more fair price. You don’t want to overpay and be stuck upside down on your house as the appreciation slows.

What do you think? Let me know if you have any other sources or data you’d like to talk about.