The real estate market is currently in a state of transition after a record year for home sales in 2021. In fact, more homes were sold in 2021 than in any year since 2006. What a difference a year makes though. As of June 2022, home sales have posted a year-over-year decline of 24.1%. Rising mortgage interest rates, a persistently low inventory, lower home sales, reduced prices, high inflation, & a recession are all significant factors in the current housing market. Although the overall market is transitioning slowly from a seller’s market to a buyer’s market, not all segments of the market are behaving the same.
A shift in the inventory of homes for sale
As mentioned above, shifts in inventory, sales, and prices is resulting in a re-balancing of the housing market. Interestingly, this comes after a period of time that was arguably the most competitive housing market ever. As a result, many home sellers are adjusting their expectations to better adapt to the current market dynamics. With this said, home prices are still at or near record highs thus forcing many buyers to search in lower price ranges. To better analyze recent market trends, we breakdown the various tiers of home prices and their corresponding inventories below:
- Top third of home prices: As of July 2022, the inventory of homes for sale was up 11% month over month and 19.3% higher than the prior year.
- Middle third of home prices: As of July 2022, the inventory of homes for sale was up 12.7% month over month and 17.3% higher than the prior year.
- Lowest third of home prices: As of July 2022, the inventory of homes for sale was up 11.2% month over month and 10.4% higher than the prior year.
For perspective, inventory in the least expensive tier was growing on a monthly basis at nearly twice the rate of the most expensive homes. This underscores the increasing competitiveness in this tier of housing.
Monthly payments on a typical mortgage are 60% higher than they were a year ago. Not surprisingly, this is likely contributing to buyers gravitating toward less expensive homes. As a result, competition for the lowest-priced homes in each market is now stronger than mid- and high-priced homes, reversing a pandemic trend. With more buyers being stretched from a home affordability perspective, we are seeing more competition in the lower priced home market. In fact, many buyers are adopting this approach in order to get their foot in the door for home ownership. Many of these buyers are thinking ahead so that they may possibly move up to larger homes in a few years while keeping their initial homes as income-producing rental properties.
Do you have questions about the South Florida real estate market? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search App today!