It is no secret that the real estate market is entirely overheated, with the demand for single-family homes far exceeding supply. Although this shortage has been caused by many factors, two in particular stand out from the rest.
The first contributing factor is the sheer lack of single-family homes across the nation. This was caused by the antics of greedy developers, who purchased single-family homes that were foreclosed during the Great Recession of 2008. From there, they transformed these homes into expensive rental properties — hence why the number of rental properties skyrocketed from 11 million in 2009 to 15 million today.
The second contributing factor is that millennials — those born from 1981 to 1997 — are finally coming into their own and settling down. Seeing as this generation is now the largest living in the nation — and the fact the economy and job market have improved exponentially — it is easy to understand why so many millennials must compete so fiercely to purchase the homes of their dreams.
However, after a summer filled with bidding wars and making offers that were exponentially over the asking price, the housing market has finally cooled like the weather. According to the most recent National Association of Realtors report, existing home prices slid to a median $245,000 in September — down approximately 3.2 percent from August prices.
With that being said, these existing home prices are still up 4.2 percent from last year — meaning the housing market may not have cooled down as much as some have claimed.
This is because existing home prices often decline in the fall. Most homebuyers begin their search early in the year with the aim of moving into their new abode by late spring or early summer. As a result, the homes that are being sold this time of year are often smaller — due to previous owners purchasing larger homes — and therefore less expensive, thus driving down the average cost of existing homes on the market.
Does this mean home prices are not truly slated to drop, and that next summer may be filled with as much fierce competition as this summer? Not necessarily, but prospective homebuyers who enter the market next year will likely be met by similar circumstances, as those who have been displaced by recent natural disasters — such as the California wildfires and hurricanes Harvey, Irma, and Maria — may be seeking new homes as well.