Insights

3 Housing Market Trends to Watch This Month

The housing market has seen its share of upheaval over the past couple of years. For months, buyers have been struggling with sky-high home prices and an almost unbearable lack of inventory.

But the housing market could undergo some changes in August. Here are a few trends buyers, sellers, and real estate investors should be aware of.

Image source: Getty Images.

1. Inventory will probably increase

Housing inventory is still sitting well below the level needed to meet buyer demand. But in recent months, it’s been creeping upward. And there’s reason to believe that inventory will continue to rise during the month of August.

The Federal Reserve just implemented a substantial interest rate hike for the second month in a row. That’s apt to make mortgage borrowing more expensive, which means buyers may have to pull out of the market due to higher costs. That’s a scenario sellers will likely want to get ahead of, so we could see an uptick in listings as a result.

Furthermore, many financial experts have been sounding warnings for months about a potential recession. And while it’s hard to predict when our next downturn will hit and how bad it will be, a fair number of sellers are apt to be spooked by those doomsday predictions — and that alone could drive an increase in inventory over the next number of weeks.

2. Mortgage demand is likely to decrease

Mortgage volume is down significantly compared to where it was last summer. And the reason boils down to higher borrowing rates, which buyers are starting to balk at.

As mentioned, it’s likely that mortgage rates will increase this month following the most recent Federal Reserve rate hike. That could lead to even fewer mortgage applications — and a greater buyer pullback across the board.

3. New construction contracts could pick up

In June, new construction sales fell 17% compared to June 2021, according to data from the U.S. Census. As such, builders may grow desperate enough to offer up discounts to buyers and investors looking to scoop up new construction homes.

As it is, builders have increasingly been offering up incentives for newly built homes. Even if prices don’t come down substantially, buyers may opt to jump at the opportunity to snag upgrades for free.

Should real estate investors plan to act in August?

Investors who are looking to unload residential properties this year to free up capital may want to consider listing their homes in August, before inventory picks up even more and buyer demand shrinks. Meanwhile, those looking to purchase income properties could have more opportunities this month as inventory rises.

As for affordability, investors should not expect home prices to drop dramatically. But these days, rental demand is very strong, so investors who pay a premium for an income property might still benefit financially.

All told, it will be interesting to see what transpires in the housing market during the month of August. But it won’t be surprising to see inventory increase, mortgage applications decrease, and new construction grow more popular.

The Motley Fool has a disclosure policy.

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