Asking prices for homes are finally coming down as sellers face the new reality: interest rates are higher than they were a year ago, and potential buyers are now worried about the economy. It’s beginning to look more like a buyer’s market, according to a new report.
Home prices, while still higher than a year ago, were pulling back in most major markets.
Home values in November were 5.1 percent higher compared with November 2017, according to a report released Wednesday by CoreLogic. That is down from the 5.4 percent annual gain seen in October. CoreLogic is now projecting a smaller, 4.8 percent gain in November of 2019.
“The rise in mortgage rates has dampened buyer demand and slowed home-price growth,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Interest rates for new 30-year fixed-rate loans averaged 4.9 percent during November, the highest monthly average since February 2011. These higher rates and home prices have reduced buyer affordability.
There is also more supply on the market now, as new listing come out amid a slower sales pace. Last spring, more than half of the nation’s 50 largest housing markets were considered ‘overvalued,’ meaning prices were at least 10 percent higher than their long-term sustainable levels. In November, that share slipped to 44 percent.
Mortgage rates shot up in the fall, and by the start of November the average rate on the popular 30-year fixed mortgage sat just over 5 percent, according to Mortgage News Daily. It has since fallen back, in response to the major sell-off in the U.S. stock market, and wider concerns over global economic growth. The rate hit 4.61 percent on the last day of 2018. That is still 57 basis points higher than the end of 2017.
The drop in rates, however, comes amid concern over the U.S. economy. Buying a home, which is most consumers’ single largest investment, is an incredibly emotional decision, and this new concern could overshadow the benefits of the drop in rates and prices.
“A strong economy helps homeowners feel confident about the value of their property,” said Frank Martell, president and CEO of CoreLogic. “If recent declines in the stock market shake consumer confidence in the national economy, we may see homeowners’ perception of home value change and a subsequent buyers’ market emerge in 2019.”