It was the housing market that just wouldn’t quit. Driven by low inventory and pandemic-induced FOMO, the last year-plus in real estate has been as nutty as many in the industry can ever remember.
All-cash offers became the norm. Inspections were being waived from coast to coast. And anything even remotely liveable or well located was driving a feeding frenzy of buyers. For sellers, it seemed as if the good times would never end. Buyers felt the same.
Except now there are signs that the housing market is finally starting to return to some semblance of normal.
Sales are slipping: According to the latest data from the U.S. Census Bureau, home sales dropped in June to their lowest level since April 2020. Those are pre-pandemic numbers.
- Sales of new single family homes fell to an annualized rate of 676,000, 6.6% below May’s rate of 724,000 and 19.4% below the June 2020 level of 839,000.
- The median price of a newly built home in June rose just 6% from June 2020
- The inventory of new homes for sale jumped from a 5.5-month supply in May to a 6.3-month supply in June. Last fall, it sat at a low of just 3.5 months.
All of this is like a breath of fresh air to exacerbated buyers who have spent months trying to break into the market with little luck, and it’s due to a variety of different factors.
High lumber costs that held up new construction are starting to ease, leading to more inventory. Sellers who were holding out during the pandemic (because who wants to move in the middle of a pandemic, no matter how much you can get?) are starting to list their homes, further adding to the inventory. And frankly the all-cash buyers who were active until recently have made their purchases and have moved on. There aren’t as many deals left for them.
Insight: “We also know there are shortages of appliances, labor and affordable lots. The moderation in home sales is likely a combination of sticker shock and the slowdown in the ability of builders to finish homes because of a variety of delays.” — Peter Boockvar, chief investment officer at the Bleakley Advisory Group
A new normal: But just because the market is becoming more normal doesn’t mean it will ever go back to how it was before. The median price for a house in the U.S. is currently around $350,000, up from around $320,000 before Covid. Those prices aren’t going down, so buyers will have to get used to paying more to live where and how they want to. After all, we’ve been waiting for the Millennials to move out of the basement and get places of their own. Now that they are, they’re driving up prices for the rest of us.