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The rate of home price growth has started to slow, and the competition for homes may be showing some signs of easing somewhat.
“The market’s topping out,” Mark Zandi, chief economist at Moody’s Analytics, told realtor.com®. It’s “starting to show cracks. It feels like we’ve hit the apex, and we’re moving to the other side of it.”
But that doesn’t mean the housing market is heading for a bubble that is bound to burst. Mortgage lending has remained tight. Real estate economists have long said the current frenzy in the housing market is no housing bubble that is reminiscent of nearly a decade ago with the run-up in real estate.
Median home asking prices are more than 12% higher than they were a year ago. That is less than the 17.2% annual jump in prices in more recent months, realtor.com® reports.
Some buyers are getting priced out of the market. There is also a severe shortage of homes for sale: Total housing inventory is down 42% year over year, as of last week, according to realtor.com® data. Home sales have fallen from inventory challenges, too. Existing-home sales dropped 0.9% in May month over month, the fourth consecutive month of declines, the National Association of REALTORS® reported last week.
The number of mortgage applications for home purchases dropped 14.2% annually during the week ending June 18, according to the Mortgage Bankers Association.
Buyers still in the market may soon start to see fewer bidding wars and fewer offers that are way above the asking price. Some of the recent drops are due to the year-over-year comparisons. The COVID-19 pandemic was taking a severe toll on housing a year ago.
Still, Joel Kan, an economist with the Mortgage Bankers Association, told realtor.com® that he believes the number of purchase applications for mortgages will continue to rise this year. But he believes it will mostly be driven by higher-end buyers.
Regardless, economists are generally predicting an overall slowdown in prices and more moderation rather than any major downfall. Many potential home buyers are still eager to purchase so they can take advantage of low mortgage rates; limited housing inventory will continue to fuel demand; and builders are unable to build fast enough to catch up to buyer demand.
“Prices are still at record highs, and I expect them to hit another record or two this summer,” said Danielle Hale, realtor.com®’s chief economist. “Buyers aren’t going to get a deal, but they might be competing with fewer offers. … There have been signs that the momentum in the housing market is slowing. The competition might not seem as intense as it’s been in the last few months.”