{"id":32677,"date":"2022-08-19T17:22:25","date_gmt":"2022-08-20T00:22:25","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=32677"},"modified":"2024-03-15T07:30:14","modified_gmt":"2024-03-15T14:30:14","slug":"is-the-real-estate-market-slowing-down","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/is-the-real-estate-market-slowing-down\/","title":{"rendered":"5 Signs the Real Estate Market is Slowing Down (And How to Navigate It)"},"content":{"rendered":"

The U.S. housing market is undergoing a rebalancing. Visit\u00a0HomeLight’s 2022 Housing Trends Hub<\/a>\u00a0for information on how to navigate a shifting market \u2014 whether you’re a seller, buyer, or homeowner.<\/em><\/p>\n

When it comes to the U.S. real estate market, the last two years have been ones for the history books. They\u2019ve been years where demand far outpaced supply, home values skyrocketed, and bidding wars became the norm.<\/p>\n

But, as we navigate through 2022, there are signs that the market is shifting \u2014 and a slowdown is upon us. Here are the key changes occurring this year, as well as the impact this changing market is having on homeowners, sellers, and buyers.<\/p>\n

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5 signs that indicate a real estate market slowdown<\/h2>\n

It\u2019s important to remember that a real estate slowdown doesn\u2019t mean the market is crashing \u2014 or that buyers and sellers should consider pulling out of the market until things \u201cstabilize.\u201d<\/p>\n

The fact is, periods of highs and lows in the real estate market are normal, with the market following a fairly consistent 17- to 18-year cycle<\/a> that moves through a housing crash recovery, expansion, oversupply of available homes, and then sometimes a recession.<\/p>\n

It\u2019s also important to note that many real estate professionals view the current slowdown as a \u201creturn to normal\u201d after a few outlier years. \u201cWhat\u2019s happening is that we\u2019re going back to the norm,\u201d says Frank Procopio<\/a>, a real estate agent with over 17 years of experience in the Syracuse, New York, and Naples, Florida, real estate markets. \u201cThe years 2017 to COVID represented a normal, healthy market.\u201d<\/p>\n

\u201cWe\u2019ve gotten calls that houses are dropping in value, but that\u2019s not what we\u2019re seeing,\u201d\u00a0 Procopio says. \u201cWhat\u2019s happening is that houses aren\u2019t getting three times what they\u2019re worth like they were a year ago \u2014 they\u2019re getting twice the amount, instead.\u201d<\/p>\n

\u201cThere\u2019s a difference.\u201d<\/p>\n

This return to normal can be measured by five signs that the market is slowing down. They include:<\/p>\n

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1. Higher home inventory<\/h3>\n

Although the number of available homes hit a record low i<\/a>n December 2021, supply has been growing this year. As of June 2022, there were 19% more available homes<\/a> than the year prior. In some metropolitan areas, the gains have been even larger. In Austin, Texas, for example, supply grew by 145%<\/a> compared to the year prior. Both Stockton, California, and Dever, Colorado,<\/a> saw significant increases as well, at 58% and 47%, respectively. The higher number of homes on the market is good news for buyers, who have more options and less competition than they did a year ago.<\/p>\n

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2. Home price gains are slowing down<\/h3>\n

For the past two years, home values have been on a fast, upward swing. During this time, homeowners saw their properties skyrocket in value by almost 20 percent \u2014 the largest annual home price increase<\/a> in the history of the Federal Housing Finance Agency\u2019s House Price Index. This led to the average American homeowner gaining $50,200 in home equity<\/a> in 2021 alone. And while economists don\u2019t see values dropping<\/a> significantly any time soon, the rate at which home values will continue to rise is beginning to slow down.<\/p>\n

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3. Price reductions are becoming more common<\/h3>\n

When the market was at its peak, home price reductions were almost unheard of. Instead, buyers were scooping up homes way over asking price, often without even requiring an inspection. Now, as inventory begins to grow, and the market gets less competitive, this has started to change. In May 2022, 10.5% of sellers reduced the price <\/a>of their home \u2014 up from 6.2% the year prior.<\/p>\n

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4. Mortgage interest rates are increasing<\/h3>\n

The U.S. Federal Reserve has raised interest rates multiple times<\/a> this year in an effort to combat the nation\u2019s growing inflation rate. These rate hikes have made it more expensive for consumers and businesses to borrow money, which has pushed up mortgage rates, as well. In the past six months alone, mortgage rates have doubled \u2014 going from 3% to almost 6%<\/a>.<\/p>\n

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5. Fewer people are shopping for homes<\/h3>\n

The combination of rising home values and interest rate hikes has been enough to push some homebuyers out of the market for affordability reasons. As interest rates have increased, the number of interested buyers has decreased, with mortgage applications for single-family homes down 17%<\/a> in June 2022 compared with the year prior. Overall demand for buying a home is also down, with one agency reporting a 14% decrease<\/a> in requests for home tours and other home-buying services in June 2022.<\/p>\n

\n While I do think buyers have options right now, it\u2019s really important that they are clear on their long-term plans. Buyers should be asking themselves whether they\u2019re seeking their forever home or whether they\u2019ll be relocating in a few years. Also, what their family plans are. I don\u2019t feel like enough real estate agents talk about exit strategy.<\/q>\n
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