The effect of a housing market shift on home sellers

In this blog we address the effect on sellers' of a shifting housing market and in the previous blog we addressed the effect on buyers - if you missed the last blog you might want to go back and compare these two blogs. Our housing market has been strong and robust, even through the pandemic. Here in the DFW Metroplex we have a strong economy yet there are signs of a shift beginning.

Our area has done remarkably well in managing through a post-COVID market as we noted in the previous blog on the effect of a shifting housing market on buyers. According to an article by Marco Santarelli in the August 7, 2021 Norada newsletter the “average days on market (DOM) fell by 25 days, confirming that demand for housing is still robust” as echoed by sale prices that have risen by nearly 22% year-over-year from $353,032 to $450,922.

Now that we are midway into 2021, the predictions are that the current trends will remain – at least so far. This is all good news for the seller and forecasts are for a repeat remainder of 2021 into the first half of 2022; however, are there signs of a looming shift in the market. Several analysts believe that there are soft spots that bear watching and even though the Dallas economy is strong there are indications that the high rate of growth may be passing soon. What are the major factors to watch regarding a shift in the market?  

Rising interest rates

We have enjoyed historically low interest rates that are still a major factor in the housing market.  At the beginning of the COVID-19 pandemic, the Fed dropped rates to positively influence the market. The Fed has done this several times in the past to free up capital and required liquidity in the market and this time it worked like extraordinarily well for the 2020 housing market. It’s unlikely we would have seen such monumental sales and price figures had the fed not taken this action. Now, as the U.S. economy struggles to recover, analysts anticipate these rates will rise back to the pre-COVID levels. Admittedly, even the pre-COVID numbers are historically low, the shift of a full point on a loan can make a big difference to a buyer that is on the cusp of qualifying for the home they want. This shift will likely dampen the home buyer feeding frenzy the market has experienced over the past 12 months but will not be sufficient to greatly alter the markets upward trajectory. Rising home prices and scarcity of inventory are still expected to remain but at less record setting trends than in the past 18 months.

Expiration of federal aid

Another catalyst for that could cause the market to soften could happen when federal aid expires. In March 2020, the U.S. government enacted the CARES ACT, which provided a wide range of government benefits from unemployment extension, stimulus for citizens, paycheck protection for businesses, and required lenders (at least those receive federal loan guarantees) to offer mortgage forbearances to homeowners. Along with this has been the Eviction Moratorium that has prevented landlords from evicting tenants who failed to pay their rent if they met certain criteria. Recently, these government payouts have become political football; however, at some point, the programs must end, and we may see some big changes as a result. Some homeowners, despite a forbearance, may fall behind on their mortgages, employees might not have jobs to go back to, and even more, businesses may have to close for good. If any of these happen on a large scale, the U.S. housing market will experience a major shift. The picture is not clear as to what the full effect could be yet it is intuitive that thousands of foreclosures and short sales will have a very specific short term effect on the current sellers’ market with the sudden shift in inventory. Analysts; however, are divided and lenders appear to be looking to find ways to avoid the foreclosure path - all good news for sellers and those in difficult financial situations.

Increased inventory

The basic concept of supply and demand is also a powerful driving force behind the current housing rush. The market has not yet been able to roll up the inventory needed to overcome the dramatic drop that occurred at the beginning of the pandemic. Now, as more and more buyers have come into the market, the issue has become even more severe. Despite new home builders are now producing in record numbers lumber and material costs have risen substantially adding upward of $30,000 on average to the price of a new home according to the National Home Builders Association and coupled with interest rates that are beginning to rise some buyers are being taken out of the market.

Inventory is the number one indicator that distinguishes a buyer’s market from a seller’s market; however, the market is so strong in the DFW area that it is unlikely the combination of all of these factors could swing our local market from a strong sellers’ market to a buyers’ market in the foreseeable future.

It’s important to keep an eye out for these indicators. Once the for-sale signs start going up, it’s too late. Stay informed by getting on a loan officer or mortgage broker’s email list, read online financial publications and updates daily, and have a real estate agent keeping you up-to-date on sales in your neighborhood.

The shift can happen faster than we think. If we learned any lesson from 2008 it is that we won’t know that the market has shifted until it’s too late, or as one analyst put it "until For Sale signs start popping up in your neighbor’s yard." Just like investing in the stock market – trying to “time the market” is a dangerous game.

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Geni is a native Texan and has spent her life in the Dallas/Fort Worth Metroplex. She has served North Texans for nearly four decades providing expert advice and real solutions to their real estate goals. She is an author, speaker and trainer with an impeccable reputation for integrity and determination. Geni’s personal contacts reach across literally thousands of the top brokers and agents throughout the nation, affording her a unique ability to help you with your relocation needs, Geni and her Team know how to SELL, what works and what doesn’t! She has a proven track record of selling homes faster and for a higher price than most agents, even in the most difficult markets! You can be assured of the most professional and successful marketing strategy for sellers, and a thorough knowledge of the area for buyers. Geni’s credentials include earning 12 highly recognized designations and 100s of Five Star Reviews, which is why Geni is known as a Master of Residential Real Estate.

This article is under Copyright © June 2021 Geni Manning, Geni Manning Real Estate Group, Frisco Stars, Frisco, TX.

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