2013 has been a strong recovery year as the market came roaring back from the lows of the great recession. This summer the average sales price hit an all time high, even above the peak levels of 2007 and 2008. The market swell has calmed for the time being however and sales are slowing. This week we are releasing the market stats for Mecklenburg County for August 2013 in comparison to the previous month and then to the same month last year.
The biggest news is that pending home sales are down 10% within the past month. Pending sales are those homes currently under contract which makes this stat an excellent predictor of what home sales will be in 30-60 days. Expect sales to be down over the next few months.
A market slowdown is normal this time of year as we head into fall so it is not cause for panic. However, two factors are weighing on my mind and causing me to wonder what the next 12 months will bring.
First, 2013 saw a tremendous surge of buying activity due to “pent up demand” or buyers that have been waiting to buy for years but couldn’t until now. With that surge of demand slowing, I do not expect to see the pace of sales from early 2013 to continue into next year.
Second, interest rates have risen a full point in a very short period of time. While current rates are still historically low, there is an apparent sticker shock that buyers are experiencing right now. Consider a buyer that was looking up to $400,000 with a loan pre-approval at 3.5%. Now that rates are up to 4.5%, that buyer can only pay $350,000 to have the same payment. With limited inventory, one can understand that if this buyer was having a hard time finding a home for $400,000, its going to be awfully tough for him to find a good fit at $350,000. Therefore either expectations need to come down or home prices need to come down. Neither of those things are likely to occur overnight. So I expect things to slow down from a sales standpoint until one of those things takes place.
Here’s a summary of all the market stats for August 2013:
– Home sales are down 2% from last month, but up 8% from last year.
– Average sales price is down 4% from last month, but up 12% from last year.
– Median sales price is down 4% from last month, but up 14% from last year.
– Average price per square foot is down 3% from last month, but up 10% from last year.
– Average time on market is up 7% from last month, down 20% from last year.
– Pending home sales are down 10% from last month, but up 4% from last year.
– Supply is down 3% from last month and down 27% from last year.
– Mortgage rates are up to 4.46% from 4.37% last month and from 3.6% last year.
– Affordability is up 3% from last month, but down 24% from last year.