The main indicators of how things are doing are the Buyer Home Demand Index, the months of inventory and days on market. I’ll Compare those numbers for September to the numbers for past months – see if there are trends showing upward movement or downturns.
So first thing – The Home Buyer Demand Index–that is still high in the Eastern Panhandle with Berkeley County showing the highest – all zip codes in Berkeley are showing high demand for housing so Berkeley is still strong. Jefferson – also mostly in the high range – a few zip codes showing moderate demand. The blue indicates limited demand and a small portion around Shenandoah Junction is showing that. Morgan’s demand index is showing steady with limited demand in Great Cacapon. So overall, the Eastern Panhandle is still in pretty high demand. And to put it in perspective, many of the areas in the DC metro area where prices skyrocketed have moved from a high demand status to steady or falling demand. Including Frederick, Washington DC and parts of Northern Virginia. So The Eastern Panhandle – particularly Jefferson and Berkeley – is doing good.
Next thing to look at is Months of Inventory which is a good indicator whether we are in a seller’s market, buyer’s market or neutral. Berkeley and Jefferson in September show less than 4 months of inventory, Morgan just over 4 months. So all three showing a seller’s market at this point. So that’s all holding steady.
Next thing to look at -How long did it take sell? This is where we can see a trend. All 3 counties show steady increases in the time it takes to sell a house. Berkeley has gone up every month for the last 4 months – September shows Berkeley at 14 days on market. Jefferson also shows a jump in days on market – up to 20 in September. And same for Morgan. Just over 20 days on Market in September. According to Realtor.com, the median number of days on the market for an American home stands at 31. So even though days on market are trending up, homes here still sell faster than the median for the country.
So to summarize, we are still in a Seller’s market, buyer demand is still high and even though days on market is less than the median for the country, that number is trending up so it’s taking longer to sell a home. The frenzy we were experiencing is slowing down which is not a bad thing. As far as predicting what’s ahead – here’s some interesting things to consider.
According to Freddie Mac, for every one percentage point increase in mortgage rates, house sales would decrease by around five percent, and price growth will slow by four to six percentage points. So to simplify this, if values are increasing by 15% a year, a mortgage rate increase of 1% would decrease price growth by 6 points so the value increase would drop to 11%. And just to clarify, that’s a drop in price growth not a drop in the actual price. So on a $300,000 house, instead of going up $45,000 in a year, the price would go up $33,000 with a 1% rise in mortgage rate. Last year the interest rate was around 3%, it’s now 6% so that would indicate a decrease in price growth of 18%. In some cases homes went up 50% in a year or less – so using that formula a rise of 3 points interest would drop that down to 32% so prices still go up but not as much as the crazy rise in prices over the last year which was a blip and not sustainable. And this formula is not going to apply to every area — some areas will experience a larger drop than that. Price growth rates are regional or even local. So what’s happening in Chicago could be different that what’s happening in the Eastern Panhandle.
Here’s another tidbit from Freddie Mac: As work-from-home becomes increasingly popular, it is anticipated that migration to lower-cost areas will continue to rise. Sounds to me like they are talking about the Eastern Panhandle. Lots of people moving here are from the high housing cost areas around DC and Baltimore.
Dave Ramsey is a financial adviser that’s pretty well known and he’s pretty bullish on the housing market. According to him, the current market does not compare to the housing crash in 2008. it’s all about supply vs demand, and the demand for houses is not likely to drop below the level of houses for sale anytime soon. 12 million more people need houses now compared with 2007,and there are half as many houses for sale now as there were back then. Also, millennials are in the prime age to buy houses and there are millions more 35-year-olds in need of houses now than there were in 2007. And, even though there are more people who are likely ready to buy a home, there are fewer new homes being constructed.
So “the number of buyers would have to go down dramatically before the house market prices go down.” And because of the factors I just quoted him saying, that is not likely to happen. He says price growth may slow down or even out, but price drops are not likely.
