Has the market finally plateaued? Before we dive into the specifics of this situation, let’s take a look at some statistics from this month’s market to draw a conclusion.
We entered August with a sustained trend of record breaking low inventory levels. We’re down by 37% compared to this time last year. In terms of new homes coming onto the market, the figure stands at a dismal 1,912 homes, which is certainly not enough! We would need around 3,000-4,000 new homes to make a difference. We’ve also had 3,600 homes sold, resulting in a scenario where we certainly won’t see any significant inventory increase and might even see the levels dip back down.
I’d now like to get more into detail about why the market has potentially plateaued a little bit. One trend I’ve noticed is that price reductions went up by around 5% across the board. This likely occurred because homeowners put their places up at an inflated rate hoping to get top dollar, only to be let down and having to adjust their expectations accordingly.
Another big contributor to this plateauing is our affordability index. This metric tracks the average household income compared to the median sales price. As of this month we’ve hit the lowest affordability index we’ve seen since 2018. With prices soaring up to 22%, it’s inevitable that we will hit the affordability index threshold. This is likely to keep prices stable until we see incomes increase.
We are seeing the national average income increase across all industries, and once this hits closer to home we’re likely to see a healthier market marked by healthy appreciation rates of around 5%.
If you’re thinking about selling, now is definitely the right time. Once we head into the winter season, we will see sales drop significantly. This is just a regular occurrence because of the holiday season. If you had aimed to close on the sale this year, you should take advantage of the current hot market we’re in that’s full of buyer activity.
To all my buyers out there, I’d suggest you look past the little repairs needed when picking out a place. There’s a trend of houses that need just a small amount of work getting overlooked. There are a lot of good deals out there on properties with good bones, but lack the luxury flooring and countertops that most folks like. I’d suggest you instead take advantage of the low interest rates and then utilize those funds to make the modifications you desire.
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