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Motley Fool Issues Rare “All In” Buy Alert
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Although home prices have been sky-high for months on end, buyer demand has held relatively steady over the past few years. But in recent months, existing-home sales have been on a steady decline. And in June, existing-home sales were down 5.4% compared to May and 14.2% compared to June of 2021, making a more significant drop, as per data from the National Association of Realtors (NAR).
Now to be clear, a drop in existing-home sales doesn’t automatically indicate that buyer demand is waning. Rather, a big part of the reason home sales have been lower is that inventory has been lower. And, well, it’s hard to sell more homes when there aren’t many on the market.
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But still, lower home sale volume could also indicate buyer pullback to some degree. And that should serve as a wakeup call for real estate investors. In fact, here are a couple of moves investors might consider given that the housing market could be on its way to a gradual but notable cooling.
Many real estate investors hold income properties because they’re a steady source of revenue, and also, because, like all homes, they have the potential to appreciate in value over time. But managing an income property can also become a hassle. And if it’s a hassle you’re tired of, now’s the time to put that home up for sale.
While home sales may have plunged in June, home values have held up just fine. In fact, in June, the median home sale price was up 13.4% on an annual basis, as per the NAR. That indicates that now’s a good time to list a home and walk away with what’s hopefully a sizable profit.
But if you’re looking to unload an income property, you’ll want to move quickly. If buyer demand continues to wane, it could translate to lower-priced offers on your home, which means less money for you.
Since home values are up on a national scale, real estate investors and regular homeowners alike are sitting on record levels of equity. And if you’re looking to tap that equity — whether to make renovations or invest in another venture — then now’s a good time to do it.
Home values may be up now, but if buyer demand drops in the coming months, it’s apt to impact home prices. Once that happens, property owners across the board may be left with less equity to borrow against.
Not necessarily. As mentioned, a big reason home sale numbers are down is that there haven’t been many properties to buy. But it’s also fair to assume that buyer sentiment is playing a role in those numbers.
The reality is that it’s gotten really expensive to purchase a home, not just due to today’s prices, but also, due to soaring mortgage rates. And so buyers may finally be reaching the “enough is enough” stage of the house-hunting process.
There’s absolutely no reason to think that home values are about to start plummeting overnight. But could they gradually decline? Absolutely. And that’s something savvy real estate investors will want to get ahead of.
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