### Housing Market Trends:
1. **Pricing Pressure**: There are signs that the housing market could experience downward pressure on prices towards the end of 2024, reminiscent of the market slowdown at the end of 2005.
2. **Inventory Surge**: Active listings have increased by 37% since the beginning of the year, which is a positive for buyers (more choices) but creates more competition for sellers. This is leading to homes staying on the market longer, potentially causing price reductions.
3. **Contract Ratio**: The contract ratio (a key indicator of buyer activity over 60 is hot and 30 or lower is cold) has dropped from 47.7% in February to 31.5% today, signaling a weaker market. This low ratio is approaching levels seen before market slowdowns in previous years, though the Cromford Report doesn't predict a crash. Of course this could all change at any point a significant drop in mortgage rates could bring more demand to soak up the supply and more likely is the seasonal reduction in active counts that we normally see every year after the middle of November.
4. **Market Weakness**: Despite the increase in active listings, the market is still not showing the same buyer demand as earlier in the year. Sellers are starting to lower prices to stay competitive.
Now anecdotally and a lot of agents have been saying the same thing that I'm going to tell you right now is a lot of people are waiting till after the election now it's after the election some of them may put their home on the market or some of them may say well now at this point I'm going to wait till after the holidays. The one thing I would say is if there's buyers in the market this time of year there's super serious buyers they're not tired kickers usually in the retirement communities that's our biggest part of this season for winter visitors also. But the thing i would point out is that if some people do take their homes off the market and you do not then there could end up being less inventory. Again This is why we like to track this stuff daily weekly and bring it to you so you know exactly what's going on and what the trends are and what it may look like not only now but in the next 30 60 90 days.
It's very rare to leave the a year with more listings than we had at the beginning of Nov, this did happen in 2005. There was a clear signal that the housing boom back then was entering its bust phase. Wise lenders and developers took notice of that signal but too many were not paying attention. I very much doubt we will see the same thing in 2024 but you never know for sure.
### Mortgage Rates and Buyer Purchasing Power:
1. **Loss in Purchasing Power**: Home buyers have lost $33,000 in purchasing power over the past 6 weeks as mortgage rates hit 7%. A buyer with a $3,000 monthly budget can now afford a $442,500 home, down from $475,000 just a few weeks ago due to the higher rates.
2. **Current Mortgage Rate**: As of the latest data, mortgage rates are at 7.09%, significantly higher than a few months ago, which has affected buyer budgets.
3. **Opportunities**: Buyers can explore options to lower their rates, such as assumable mortgages or incentives from new construction homes that can offer rate buy-downs.
### New Construction Homes:
- **Market Share Decline**: New construction homes now represent only 28% of homes for sale, the lowest in three years, although in some markets like Phoenix, new construction sales are still strong compared to resales.
- **Builder Caution**: Homebuilders are more cautious now, focusing on selling existing inventory rather than continuing to build in the face of high mortgage rates.
### Outlook and Volatility:
- **Election Impact**: Expect prices to rise as rates go down and more inventory comes online with the the consistent lower rates we expect to see over the next few years, and as regulations and land opens up more.
- **Buyer Market**: The Cromford Market Index (CMI) shows that we are now officially in a buyer’s market, with supply outpacing demand, giving buyers more negotiating power. This could shift by Q1-Q2.
### What This Means for Buyers and Sellers:
- **For Buyers**: This is a good time to buy due to lower competition, potential price reductions, and negotiating leverage. Consider looking into new construction or assumable mortgages to get better deals on rates.
- **For Sellers**: More inventory and slower buyer demand mean sellers may have to adjust expectations and possibly lower prices to sell in the current market.
Looking ahead, I would expect we'll see rates going down 2025 - 2026, prices will surge a bit initially and then stabilize to normal seasonal equity gains as normal.
Would you like further details or more in-depth information on any of these points?
