Ever since America recovered from the historic real estate bubble burst about a decade ago, housing prices have been rising creating a bonanza for sellers and a cutthroat environment for buyers. Economic prosperity pushed the housing market out of recovery mode into a real estate boom characterized by surging buyer demand, rock bottom inventory for sellers and developers, and double-digit price growth over the past decade. However, this trend seems to be coming to an end as the real estate market across the country seems to be softening.
There are many signs of this new trend, even in some of the strongest markets in the country; a rise in interest rates, an upsurge in the amount of inventory for sale, a substantial rise in the number of listings with price reductions, and an increase in the number of days homes are on the market.
According to experts, this softening of the real estate market is not unprecedented. Over the past decades, prices have been on the rise in most markets and it was only a matter of time before they got to the peak.
The softening market will be felt by everyone in the real estate industry, and in this article, we look at some of its effects on key players in the real estate industry.
Sellers are going to be hit the hardest by the softening real estate market. Most places which were recently prime spots to sell real estate for profit are slowly turning into buyer’s markets. There are more homes for sale in the markets and this increase in supply has led to a decline in demand. Sellers will have to reduce their asking prices for homes and even after doing so, they will have to wait longer than they are used to to get buyers for their properties.
However, this doesn’t mean that real estate has lost its reputation as one of the most profitable investments. You can still invest and make profits. The profit margins will just be smaller.
Buyers can look at this situation in two ways. On one hand, housing prices are falling and markets that were previously seller’s markets are turning into balanced, or buyer’s, markets. There are more options in the market and since there is less competition, buyers get more time to decide whether they want to buy or not. On the other hand, interest rates are going up which means even with falling prices, buyers could end up paying more for the home. Some buyers are holding off on buying a home, as they wait for prices to keep falling or rates to fall as well.
Since investing in a softening market is risky, fewer amateurs will be confident enough to invest in property, leaving the market to be dominated by professionals. Most investors will opt to invest in entry-level housing, which still has strong demand, but they will still make smaller profits than they are used to.
Realtors will have to step up their game. In a softening market, there is an increase in housing supply and as a result, there will be increased competition for buyers. Buyers will be more careful when buying properties and will have more negotiating power. Realtors will have to do a lot more to convince people to buy their properties.
Mortgage rates are on the rise and are expected to keep rising throughout 2019. Since even a small rise in the rates has a huge impact on buyers’ purchasing power, many buyers are going into standby mode while others are having to settle for cheaper, smaller homes. Those who wanted to upgrade their starter homes for bigger, nicer ones are reluctant to give up the existing lower mortgage rates. However, even though they are going up, mortgage rates are still historically low.
While it is unclear what the future holds for the real estate market, most experts agree that the softening real estate market has to be accepted as the new norm that could last for the foreseeable future.
Written by DorrianGrey, iWriter.com