A Pullback in Property Sales

Reports are coming out from the California Association of Realtors, indicating that homes sales are slowing down when compared to the recent growth in the housing market. An increase in home prices as well as rising interest rates is stemming sales. Even new home builders are seeing double digit price increases, which are up 4% from last year as builders focus on higher end homes.

As a result, home purchase transactions fell by over 25% in August, the lowest on record. Note that the numbers are based on contracts signed during the month, not actual closed deals. Though fewer houses are selling, those that do are experiencing rapidly rising prices, forcing many first time buyers right out of the market. It’s not just new homes either, but also existing homes are experiencing rising prices as well. Not all home sales are slowing however – with rising prices and decreasing inventories, the demand is cooling off as buyers look towards more affordable options like condos and townhomes. Condominium and townhome sales are on the rise, surging 8% from July’s sales numbers.

There could still be a light at the end of the tunnel however, as rising home prices are prompting more sellers to list their home. August saw a slight bump in inventories, continuing a much needed 6 month trend of a month to month rise on active listings. Higher interest rates are said to put off lot of buyers – but some think that if rates continue going up, then home prices may go down to keep house payments affordable. Since there doesn’t seem much chance that the interest rates will come down any time soon, some are saying that this may be the beginning of a bubble, while others see more room to grow as demand for homes increase. Keep in mind that interest rates, though on the rise, are still at historically low levels. Could this be prompting home owners to opt for a re-fi instead of selling? With concerns of fast rising rates, a major rush to refinancing may see more people hang on to their home, keeping inventory levels low.