As we reach the final stages of summer, the residential real estate market remains strong. Mortgage interest rates remain near record lows, closed sales continue to stay well ahead of 2014 and the median sales price improvements remain in a robust, but sustainable, range. However, change is on the horizon. It is now commonly accepted that the Federal Reserve will increase the Federal Fund rate in September. While this will increase mortgage rates and thus decrease consumer’s purchasing power, they will remain historically low and shouldn’t have a dramatic effect on the residential real estate market.
Most market fundamentals have aligned making it a good time to buy or sell residential real estate, except for the persistent problem of supply (lack thereof). Typically listing activity is most active in the spring and summer months, that is when buyers have the most choices. As we reach the fall and winter months listing activity diminishes. At this point it is clear that the demand from buyers has not declined, while the supply has and there is not going to be a large influx of new listings until next year. This lack of listing supply presents a problem for many buyers; meanwhile it can be advantageous for sellers.
Here are the most relevant statistics from July 2015: (Compared to July 2014)
• New Listings: 7,963 (-0.4%)
• Pending Sales: 5,097 (+12.1%)
• Days on Market: 63 Days (-7.4%)
• Median Sale Price: $225,000 (+4.7%)
• Homes for sale: 16,940 (-11%)
• Month’s Supply of Homes for sale: 3.4 (-19.6%)
The stats above tell a story; the market remains strong but listing supply is becoming an issue and will inevitably slow down the market as fall and winter approach. Fortunately the market is in a good place and the supply problem is a temporary and predictable setback. More importantly, the median sales price continues to build at a sustainable rate and the buyer demand remains strong in most areas. While low listing supplies are not good and increased interest rates could have a small effect, the rest of the fundamentals indicate a healthy and sustainable real estate market. This is positive for everyone in the long term.
Stay tuned as we roll into a new season next month.