Buying a home in today’s real estate market is not an easy task, especially when you look at where house prices are now. In June, the average home sold price rose to a record high of $ 363,300. And unsurprisingly, many potential buyers are forced to reconsider their plans due to availability issues.
Why are houses so damn expensive? Most of this is that mortgage rates from a historical point of view, they sit at a very low level, so buyers are in great demand. This demand, in turn, leads to bidding warwhen multiple buyers return with higher bids for the same property in the hope that the offer will be accepted.
But there is another reason why house prices are so high: the supply of real estate has been low for several months. Many sellers refrain from listing their homes during a pandemic, and any time demand for a given product exceeds the available supply, prices could rise.
At the same time, the housing stock increased slightly in June. At the end of the month, 1.25 million homes were on sale, corresponding to a 2.6 month supply. This represents a slight improvement over the 2.5 month offer in May. And if stocks continue to improve, this could lead to house prices finally starting to decline.
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A good sign for buyers?
The 2.6 months home offer for sale in June is an improvement we saw earlier this year. But to be clear, this is still not a particularly healthy home supply – at least not in the context of creating a flat housing market in which neither buyers nor sellers have a clear advantage.
To create this balanced housing market, it usually takes a 4-5 month supply of homes to have enough inventory for people looking to buy. With home stocks up from only 2.5 months in May to 2.6 months in June, we shouldn’t expect the supply of affordable homes to increase overnight. This means that buyers can remain on the lookout for inflated home prices for several more months before there is enough inventory on the market to drive those prices down.
However, at this stage, buyers should be grateful for any the increase in inventory we get. And since sellers have a few more months to capitalize on the milder weather, we may see more homes on the market in the near future before the winter downturn begins.
Of course, today’s buyers can still face a shortage of affordable housing in their favorite neighborhoods. And they might have to come to terms with getting higher mortgage rock the houses they actually find.
Mortgage rates are likely to remain low not only until the end of the year, but also until 2022, so it may be in the interest of buyers to pause housing searches and wait for inventories to rise after a modest improvement in June. Exposure for several months can mean the difference between a huge home premium or a much lower cost.