Introduction to Current Housing Market Trends
Despite record high home values, some major housing markets in the United States are beginning to see a decline in prices. Specific areas are experiencing different trends, with some markets dropping while others are still increasing.
Major Markets Seeing Price Declines
Recently, one market saw a 3% drop in prices due to rising inventory. Two other states are witnessing price reductions because of an increase in available homes outpacing buyers. In total, 24 out of the largest 150 metros have seen year-over-year declines. For example, Miami has experienced an 11.2% year-over-year decline, Denver 6.3%, Seattle 5.5%, Kansas City 4.9%, Oklahoma City 4.3%, and San Jose 4%.
Areas with Rising Prices
On the other hand, some areas continue to see rising prices. San Diego saw a 99.2% increase, and Las Vegas prices went up by 7.8%. Specific metros have appreciated by more than 20%.
Understanding the 18-Year Real Estate Cycle
The 18-year real estate cycle was identified by economist Fred Harrison. It consists of 14 years of expansion followed by 4 years of decline. This cycle has historically predicted cra<a href="shes, including those in the early 1990s and 2008. According to this cycle, the next real estate crash is expected in 2026. The market has followed this pattern since recovering from the 2008 crash, with a predicted final boom phase lasting until 2026.
Factors Influencing Housing Prices
Housing prices follow a seasonal pattern, with peaks in spring and summer and valleys in winter. This is influenced by weather conditions and the increased likelihood of buying and moving during warmer months. States like Florida and Texas have seen a surge in home building to accommodate pandemic-era newcomers. This has led to oversaturation and subsequent price declines in some areas.
Shrinkflation in Housing
Builders are creating smaller homes to keep prices affordable amid rising construction costs and declining buyer affordability. This trend, known as “shrinkflation,” sees homes being built with fewer amenities and less square footage.
Economic Implications
Existing homeowners are paying 21% more for insurance than a few years ago due to higher building costs. Nationally, average home prices have risen by 6.3% year-over-year. If interest rates decrease, it may spark higher demand and push prices up further. However, it could also encourage more homeowners to sell, potentially easing inventory shortages.
Recommendations for Buyers
It’s advised to buy a home only if planning to keep it for at least 10 years to mitigate short-term market risks. For those looking for short-term living arrangements (1-7 years), renting may be more cost-effective than buying, considering the long-term costs of home ownership.
Conclusion
The housing market is experiencing varied trends across different regions. Understanding these trends and the potential for future price changes can help buyers make informed decisions. The 18-year real estate cycle suggests a possible downturn in 2026, but regional factors and economic conditions will play a crucial role in shaping the market’s future.
