As home inventories rise, increases in price slow
The inventory of homes on the market across the country rose for the first time in four years as Americans are expected to take out fewer mortgages, developments that are slowing the rise in home prices, according to two reports released Wednesday.
The reports by the National Association of Realtors and Freddie Mac, the government-sponsored mortgage-finance company, are the latest indicators that the housing market is beginning to cool following a long stretch of rising prices and interest rates.
October ended the longest decline on record for housing inventories as listings nationally grew by 2 percent, or 25,000, according to the National Association of Realtors. The trend was most pronounced in urban areas, where inventory increased by three times the national average.
In the Dallas region, inventory grew 15 percent year-over-year; inventory in the Austin and San Antonio areas grew 6 percent and 4 percent, respectively.
In Houston, inventory did not tighten the way it had in the rest of the country because of the oil bust that began in 2014. But home inventories have risen here, too. In October, active listings grew 9 percent year-over-year, according to data from the National Association of Realtors.
As a result, sellers are listing homes at lower prices. Nationally, homes were listed in October about 8 percent, or $25,000, cheaper than homes already on the market, according to the Realtors.
“Buyers have been struggling for four years to find homes in their price range while dealing with bidding wars and multiple off situations,” said Danielle Hale, chief economist for the National Association of Realtors. “The inventory increase will not solve the problem overnight, but it should provide some relief to those still in the market, especially if the growth we’re seeing in more affordable homes and condos holds steady.”
Condominiums and townhomes contributed to most of the growth in inventory. While the inventory of single-family homes has stayed relatively flat — up 1 percent — condo and townhomes on the market increased 7 percent from a year ago, according to the Realtors.
A forecast by Freddie Mac also predicted that homes nationally will appreciate more slowly, slipping from 7.2 percent in 2017 to 2.9 percent by 2020. Sam Khater, chief economist at Freddie Mac, said he expects the slowdown to extend to Houston as well.
He said Houston’s home prices — which had lagged after the oil bust, but rose more quickly in September than national home prices — are overvalued.
“While job growth has accelerated this year and helped drive higher home price growth,” Khater said, “population growth has slowed the last two years and Houston home prices have become modestly overvalued, so Houston’s home price growth is expected to moderate the next few years.”
Freddie Mac also predicted that Americans will have borrowed about 9 percent less for single-family homes than the year before.
Mortgage rates averaged about 4.9 percent last week, up nearly a percentage point from a year ago, according to Freddie Mac. The mortgage-finance company projected that loan originations will fall to $1.65 trillion this year and $1.6 trillion in 2020 from 1.81 trillion in 2017.
Part of the reason for the drop is a decrease in the number of loans that are being refinanced as mortgage rates rise. Thirty-seven percent of loan originations in 2017 were refinances; that share is on track to fall by almost a quarter by the end of 2018.
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