This week, in a meeting with over 200 agents from Keller Williams Realty offices of western Washington (including my Olympia office), 78% of agents reported that their listings were getting fewer offers than they were one month ago. 70% reported that the offers they did receive were generally full price or higher. The consensus among the group was that homes are still selling quickly and for top dollar, but that buyers have found it just a little easier to purchase a home in the past month.
Why are we seeing the slight shift in a market with low supply and great interest rates? The answer is uncertain. An article published in Reuter’s this week reveals it may have to do with consumer perception.
The article, headlined, “U.S. consumers sour on housing market's buying conditions,” reported that a new Fannie Mae survey found that 35% of consumers believe it's a good time to buy, the lowest percentage reported since Fannie Mae began this survey a decade ago. That figure is down 18% since March. And 56% of respondents said they feel it is a bad time to buy.
The two reasons most frequently cited for this sentiment were “higher home prices” and “low supply of homes.” Perception drives markets, and the perception that this is not a good time to buy is clearly on the rise. But is it really a bad time to buy? After all, we call it a “seller’s market.” And who wants to be a buyer in a seller’s market?
But is it really that bad a time to buy? The fact is that when you consider the low-interest rates, the cost of buying a home has risen at the same rate as the historic average of 6% annually.
Purchase Price + Interest = Total Cost
Excluding cash purchases, the overall cost of your home is determined by the purchase price plus the interest rate of your loan. Though home prices have increased 24% in the past two years, interest rates are down 1.25%. That’s a 12.5% savings over the life of a 30-year loan. So, the price increase is more like 11.5%.
That tracks with the historical average home value increase of 5-6% per year. Add to that the fact that most forecasters are predicting a double-digit increase in home values in the next quarter of 2021 and buying a home might remain attractive to many consumers who are really paying attention.
Due to the low supply, buying a home has been challenging for many buyers. But new evidence is beginning to show some movement toward a healthier market. Things might be improving for you, curious buyer!
If you were beginning to identify with the 56% of survey respondents that feel like it’s a bad time to buy, this might be a good time to reconsider. If you were beginning to move to the sidelines, take a moment to reflect on these numbers. You might have a (slightly) better chance at securing your new home than you have had in a while.
Kristy Woodford is CEO of Holistic Home Group, which is affiliated with Keller Williams South Sound. She has over ten years of experience as a broker of residential real estate in Thurston County and leads a team of realtors experienced in serving local buyers and sellers. Contact her at 360-508-2800 or write to KWoodford@kw.com.