The KW Blog team recently sat down with Ruben Gonzalez, chief economist at Keller Williams, to discuss the U.S. housing market. Gonzalez gave a high-level analysis of market trends and explained what this may mean for agents and their clients. Read on for Gonzalez’s insights!
KW: What does housing inventory look like nationally? What does this mean for buyers?
Gonzalez: Sales for existing homes in August continued to track slightly below the pace we saw in August of last year. The general narrative is that inventory levels remain restrictive to sales and that buyers are being held back by limited choices, particularly at the entry-level price points in most markets. However, we are also now seeing mortgage rates that are nearly a full percentage point higher than they were this time last year. As an easy rule of thumb, we look at a 1 percent change in mortgage rates as having the same impact as a 10 percent increase in prices. This is enough to impact a buyer’s decision to own a home.
KW: Do you see mortgage rate increases putting a halt on demand?
Gonzalez: We are beginning to see impact on demand in areas that have experienced significant price growth over the recent years. The trend is popping up in markets, like Seattle, where inventory is increasing while sales fall. This indicates that there are buyers who are willing to wait to buy in these areas. We’ve identified most of this activity on the West Coast, but other markets that have similar patterns of double-digit price growth in recent years may start seeing similar patterns emerge. More markets are also likely to be seeing sellers having to drop prices due to the disconnect in the market as buyers see price growth slowing down.
KW: What’s your consensus of the market?
Gonzalez: While this may sound like a bit of a dramatic story, most of these markets are still in places with inventory levels in the range of three months or less. There is a lot of demand for housing right now as economic fundamentals remain very strong. The unemployment rate is below 4 percent and incomes have been rising steadily for several years now. Mortgage rates are going to be a headwind for demand as they increase, but as long as fundamentals are strong, we shouldn’t see any dramatic decline in homes sales.
Be the Local Expert
While having a high-level view of the market is helpful, it is important to review your local market numbers regularly to ensure you are the local expert for your clients. The market can shift quickly. Additionally, make sure to download Kelle – your AI-powered virtual assistant. With Kelle on your team, you have access to hyperlocal neighborhood snapshots or ‘market snaps’ that adjust in real time.
About Ruben Gonzalez
Ruben Gonzalez is the chief economist at Keller Williams. He leads in-depth research efforts and tracks leading indicators that impact the housing market.
Gonzalez creates ongoing housing forecasts and regularly provides commentary on real estate market trends to a range of national business, real estate and financial news outlets.
Gonzalez received his undergraduate degree and earned his master’s degree in economics from The University of Texas at Austin.