A recent article from the Wall Street Journal has some ‘spot on’ observations so I thought I would pass the article along to you with some of my own comments/observations.
Although the noted article is really looking at the real estate market nationwide, there are several points that I am definitely seeing in our current Houston market. One of the primary causes of the current slow down is the increase in home mortgage interest rates this year. Currently mortgage rates are hovering around 4.9% which is an increase slightly over 1% from the rate for this time last year and the highest they have been since 2011. This means that at our average sales price of $293000 the buyer is paying $167 more per month than he would have paid in 2017.
The second cause for a slow down is the increase in inventory. Earlier this year we had 3.2 months of inventory on the market with active listings a little over 23,000. Today we have a 4.5 months supply of inventory with 27,528 active listings. To clarify: at the current rate of sales it would take 4 1/2 months to deplete our inventory if no other homes were listed for sale.
The third factor influencing the slow down is the implementation of the new tax law which has reduced incentives for home ownership, i.e. the increase of the standard deduction for a married couple to $24,000. Most homeowners will not exceed that amount with their mortgage interest and tax deductions hence reducing the benefit of a tax deduction from home ownership.
Buyers today are very savvy and well informed regarding the market and where it is trending. With the Feds taking a stand that there will be another interest rate increase before the end of 2018 as well as 3 more increases in 2019 I am seeing a pull back from buyers who are nervous about the slowing market and the fact that they can’t buy as much house today due to the increased rates. If you are considering selling your home, take time to look at the current market conditions in order to make wise decisions regarding timing.
If you have any questions or comments please don’t hesitate to reach out to me. I am here to help in any way possible to reach the ultimate goal.
Below is a link to the article mentioned: