Housing market correction provides opportunities to buyers formerly boxed out

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Published Date 11/5/2018

Millennials who have delayed home buying because of the multiple offer buying frenzy are now starting to go out and look again. When others were entering the market all at once, and there weren't enough houses to go around, fierce competition for homes drove prices up — and kept many younger buyers from realizing their dreams.

According to an NPR article, this trend has been exaggerated in urban metropolitan areas from Los Angeles to New York City. Citing Lawrence Yun, chief economist at the National Association of Realtors, the report says that while homeowners were profiting from the booming market, renters and first-time buyers looking to own homes found it much more difficult, with prices rising too fast. But things are starting to shift.

“It's not that houses are becoming more affordable,” says NPR’s Camila Domonoske. “In fact, as mortgage rates are rising, it's getting even more expensive to buy a home. But those rising rates are having an impact. The runaway housing market is starting to hit the brakes.”

Most would call this a correction, not a crash. If the economy and jobs remain strong, the slowdown might be an opportunity for first-time buyers who have been sidelined by the booming market. Now that things have cooled off to an extent, realistic buyers buying homes from realistic sellers may become more the rule than the exception to it.

The recent cooling started a little early in Portland, according to the report. “In September, as price growth was slowing in cities across the country, Oregon Live observed that "major metropolitan areas are following the pattern seen earlier in the Portland area” with analysts agreeing that the biggest factor is the change in interest rates. Rates are, of course, nowhere near historic highs. In the early 1980s, because of inflation, mortgage rates topped out at 18.45%.

The report emphasized that it’s important to keep the current increase in perspective, however, because the past seven years have seen of the lowest rates ever. The issue keeping many buyers out of the market, then? Houses just got too expensive, too fast.

According to the article, affordability will continue to be a challenge for would-be homebuyers in major markets. But if the economy remains strong and the housing supply increases, the slowdown in sales could eventually lead to prices rising at a more moderate, sustainable rate.

Source: NPR, TBWS

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