NEW YORK – Oct. 23, 2018 – Keith and Kylie Beukema were bracing for a yearlong slog as they started hunting for a larger home in the Denver area, one of the hottest housing markets in the country the past few years.
Instead, it recently took them just two weeks to snag their four-bedroom dream house with mountain views in Thornton, paying $490,000 – $10,000 below asking price – after visiting just three other homes.
"I was nervous (the seller) would laugh us off," said Kylie, a 29-year-old physician. "We figured we'd get into bidding wars" and almost certainly have to pay above list price.
Denver epitomizes the slowdown taking hold this year in the nation's housing market as mortgage rates climb, home prices rise and the new tax law limits the benefits of ownership. Those hindrances are adding to a longer-standing obstacle to sales – low home supplies – and making the housing market across most of the country more favorable for buyers – if they can afford the added costs.
"Definitely, there is a shift in the market," said Lawrence Yun, chief economist of the National Association of Realtors® (NAR). "Buyer activity appears to be softening … Buyers have more chances."
While housing is still largely a seller's market, it's becoming less so, and the playing field should be roughly balanced between buyers and sellers by the middle of next year, said Ralph McLaughlin, chief economist of research firm Veritas Urbis Economics.
"I think we are entering a (return) to normalcy," McLaughlin said.
Home sales slip
Nationally, existing home sales were down 2.1 percent through the first nine months of the year compared with the same period in 2017. The prior three years, annual gains for home sales totaled 6.3 percent, 3.8 percent and 2.7 percent, according to NAR. The Realtors group on Friday reported a 3.4percent sales drop in September from the previous month to the lowest level since November 2015, though Hurricane Florence in the Carolinas contributed to the weak showing.
Prices for homes are still rising in general, although more slowly. In September the median price was up 4.2 percent from a year earlier to $258,100, but that marked a pullback from gains of 5.1 percent and 5.7 percent in 2016 and 2017, respectively.
Next year, NAR's Yun expects flat sales and price increases of just 2 to 3 percent.
Of course, housing's health varies by location. Generally, expensive Western markets such as Denver, San Francisco and Seattle had been posting double-digit yearly price gains that have slowed. More affordable areas such as Indianapolis and Grand Rapids, Michigan, are still seeing price increases accelerate. And reasonably priced Southern markets such as Atlanta remain hot, said Daryl Fairweather, chief economist of real estate brokerage Redfin.
But even the still-vibrant markets could cool by late next year as housing costs continue to mount, said McLaughlin of Veritas Urbis Economics.
Last year, economists blamed softer sales gains on skimpy inventories that limited the pickings and drove up prices, discouraging some buyers. And the nation's 4.4-month supply of homes in September – the time it would take to exhaust the stockpile assuming no units were added – was still below a normal six months or so. While low, that was up from 4.2 months a year ago, marking just the second annual increase since 2015, according to NAR.
That's largely because builders have responded to the shortages and put up more houses, mostly higher-priced units that can offset sharply rising labor and material costs.
Homes linger longer on market
In Denver, housing inventory is up 16.1 percent from a year ago, according to the Denver Metro Association of Realtors. Yet just 3,983 homes were sold last month, down from 4,994 a year earlier. The median sale price is off 5.9 percent from its April peak of $455,000. And single-family homes were on the market an average 27 days, up from 19 days in June.
Lisa Huntington-Kinn, a broker with Your Castle Real Estate in Denver, said the market started to sputter in July. Before, houses often drew dozens of bids and routinely sold for above asking price. Now, s