Friday, February 9, 2018

Bottom Remains Hot!

The entry level of the real estate market here in the Clark County area remains hot with a surplus of buyers bidding on a tight inventory of homes priced below the median. There has been a softening in the buyer pool and that may be due to a combination of higher rates and inflated value pricing people out of the market. However, inventory remains very tight in the bottom half of the market.

The middle and upper price ranges are seeing a serious slowdown in the rate of price growth. I am not seeing negative appreciation, but sellers are reducing their prices that they had up too high as the market has settled in a bit. The rush at the bottom produced a large swath of move-up buyers over the last couple of years, and that helped keep the pressure on at the top in 2015-2016 and part of '17. That wave seems to have subsided a bit and the battle in the upper price ranges has become neutral between sellers and buyers.

Interest rates will be the big story this year. It may be hard to believe for younger buyers that can't remember a time when interest rates were at 6% or more, but historically the average rate in fact hovers in the low 6% range. The treasury yields are a strong indicator for mortgage rates and treasuries are marching higher. This will ultimately result in higher mortgage rates that may reach 6% over the next years or so.

Higher rates tend to dampen the housing market. Our market however is so hot right now that a little cold water might do us some good. Just a little though ;) Buyers that have been sitting on the fence should absolutely get triggered on this interest rate issue. Rates will kill the ability to buy faster than rising prices. A little interest rate heat will also cool the "bubble" and that should help everyone rest easier. Most analysts are predicting much more modest price growth in real estate over the next year or two. This in between period where prices are a bit more stable and rates have yet to get traction to climb could be a great buying opportunity. It is a narrow window and rates will squeeze the buying strength. It's time to get on-board or stay home. The affordable house train is leaving the station.

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