SEATTLE–The U.S. housing market, especially some of the hottest areas such as Seattle, Silicon Valley and Austin, Texas, appears to be headed for the broadest slowdown in years, according to a new report.
For example, Bloomberg reported that in Seattle, where rapidly escalating costs have priced many people out of homes, no longer is it the seller’s market it once was, and that “Homes that should have vanished in days were sitting on the market for weeks.” There have even been price reductions.
Bloomberg noted buyers who have been getting squeezed by rising mortgage rates and by prices led to a market where there’s “only so far they can stretch.”
“This could be the very beginning of a turning point,” Robert Shiller, the Nobel Prize-winning economist who is famed for warning of the dot-com and housing bubbles, told Bloomberg in an interview. However, Shiller also stressed that he isn’t ready to make that call yet.
A ‘Cooling’
A slew of figures released over the past three days gives ample evidence of at least a cooling.
“Home prices are plateauing,” Ed Stansfield, chief property economist at Capital Economics Ltd. in London, told Bloomberg. “People are saying, ‘Let’s just bide our time, there’s no great rush. If we wait six or nine months we’re not going to lose out on getting a foot on the ladder.’” That means “we’re now looking at a period in which prices move more or less sideways, or increase no more quickly than growth in incomes, over the next few years.”
Stansfield is projecting a 5% gain this year and a 3% increase in 2019, compared to the 10.7% gain in 2005, shortly before the crash, Bloomberg reported.
Bloomberg noted that some of the most expensive markets are now seeing substantial increases in supply, according to Redfin Corp. In San Jose, Calif., inventory was up 12% in June from a year earlier. It rose 24% in Seattle and 32% in Portland, Ore. “Those big jumps are from low numbers, so the housing crunch is still a serious problem,” Bloomberg observed.
Not a Crisis
Still, market watchers note that the housing sector has strong support from a healthy labor market and steady economic growth, which indicates a stabilizing trend for home prices rather than anything close to the experience of the crisis, when property values plunged, Bloomberg added.
“The rate of home sales, new and existing, has probably peaked,” Ian Shepherdson, chief economist at Pantheon Macroeconomics told Bloomberg. “But it’s not going to roll over. It will gently decline.”