Owners who are just now putting their homes on the market appear to be an optimistic bunch. Whether they are too hopeful remains to be seen, but the signs are pointing to a slowdown that could stop the march of ever-higher prices.
So far, the evidence of a slowdown is spotty at best. The market in northern Virginia remains in “hot-market territory,” broker David Rathgeber tells me.
And “there is no evidence” the hot southwest Florida market is changing, says agent Robert Goldman.
Goldman believes that for the market to shift, interest rates have to move higher, the inventory of houses for sale has to increase “on a massive level,” and there has to be sudden drop in demand.
Check the interest rate box: Mortgage rates are now above 5 percent – their highest point in a dozen years – and they’re still heading north. With 70 percent of all active mortgages at rates below 4 percent, potential move-up homeowners may be reluctant to give up their low-cost loans.
“The decline is evidence that the COVID-induced boost to housing demand is past its peak and is now softening”
— Rose Quint, National Association of Home Builders
Check the demand box, too: According to research from the Federal Reserve Bank of New York, buyers are becoming discouraged. The share of those who think they’ll buy within the next three years fell for the first time since the inception of the New York Fed’s annual Survey of Consumer Expectations. And the share of renters who think they’re likely to own anytime in the future dropped below 50 percent for the first time, as well.
Even the new-home sector is seeing demand wane. Builders report that traffic has declined to its lowest point since last summer. And the share of adults planning to buy any house, new or existing, within the next year has fallen for three straight months, the National Association of Home Builders reports.
“The decline is evidence that the COVID-induced boost to housing demand is past its peak and is now softening,” says the NAHB’s Rose Quint.
Nationally, new listings slipped recently after starting to build back up. But they are expected to pick up again, with May normally being the peak month for sellers to list their places. According to new research from Clever Real Estate, a third of potential sellers, fearful of missing out on huge profits, have moved up their plans. And nearly half of them fully expect to sell for more than their asking price.
Forget the fact that almost 30 percent also expect to accept an offer within two weeks of listing. The question is: Have they already missed the boat? According to Redfin, 15 percent of sellers dropped their asking price during the four-week period ending May 1.
Maybe they were asking too much to begin with. But as Lawrence Yun, chief economist at the National Association of Realtors, sees it, “Sellers should no longer expect the easy-profit gains … as demand continues to subside.”
Royal Hartwig of Royal Family Real Estate in Illinois agrees that demand is waning, but says it’s “still a very strong market,” with “maybe only 20-30 showings in a couple of days, as opposed to the 80-100 we had at this point last year.”
Russian Real Estate Small
Not counting oligarchs, who tend to hide their investments, Russians have had little impact on the American residential real estate market over the last few years.
According to the National Association of Realtors, Russians accounted for less than 1 percent of all foreign purchases since 2015. On average, they paid $652,915 for their dwellings, versus the average of $480,695 paid by all foreign buyers. About half paid cash and use their property as their residence.
These folks probably don’t have to worry about Uncle Sam seizing their properties, unless they used cash from illicit activities – drug-running, for example, or stealing from their government – to buy them. If they did, the feds are on the prowl.
While the Biden administration has made it a priority to identify these rogues, it appears that no real estate has been seized to date. But the Financial Crimes Enforcement Network has renewed and expanded its effort to find the scallywags by requiring title insurance companies to identify persons behind shell companies used in all-cash purchases of residential real estate.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.