Many people wonder when hot housing market will begin to cool down. After all, home prices have skyrocketed nationally and buyers tend to fight back at some point.
But May’s numbers indicate that won’t happen anytime soon. Pending home sales, which measure the number of contracts signed for existing homes, were up 8% in May compared to April, according to the National Association of Realtors. This is the highest sales in May since 2005.
Home sales in progress were also up 13% compared to May 2020. Of course, at that stage of the pandemic, buyers weren’t demanding to buy homes as they are today. But this recent 8% growth is nonetheless significant, especially with housing market experts expecting a 1% drop in pending home sales in May.
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When will the market cool down?
In April, the S&P Case-Shiller National Home Price Index rose more than 14% year-on-year, the largest gain in the index’s 30-year history. But at some point, house prices may get too high for their own good, and once that happens, they must plateau before they begin to decline.
However, it is difficult to predict when this will happen. While higher home prices may deter some buyers from offering, lower mortgage rates retain buyers.
Should you be trying to buy a home right now?
Buying a home in today’s market is a controversial situation. What you get from a lower mortgage rate can be lost in the form of having to pay more for your home.
If you can comfortably afford your own space in the area you want to live in, then keep looking at the listings and keep making suggestions for properties that fit your criteria and work within your budget. But if you find that the real estate market is getting more frustrating every day, then you can take a step back and consider stopping your home search for at least a few months.
The main reason why house prices are so high is because housing inventory is low… As soon as more properties appear on the real estate market, the supply and demand ratio will change in a more favorable direction, which will lead to lower housing prices.
However, one of the factors that may have contributed to the increase in unfinished home sales in May is the slight increase in home supply compared to April. Even so, the supply of affordable homes this month was still about 20% lower than a year earlier.
Overall, this is still a rather difficult housing market to navigate. Taking a step back is not the worst thing to do, especially since mortgage rates are likely to remain competitive before the end of the year and probably even later. And in this way, you will give yourself the chance to increase your cash reserves and give yourself more financial freedom to place bets on future houses to be listed.