Is Residential Real Estate About to Tank?

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In Southern California, deal volume is off moderately, but prices continue to rise, and inventories are rising.  This is exacerbated by rising interest rates pricing many potential buyers out of the market.  If deal volume continues to fall, then eventually prices will start to soften.   I’m already seeing some major asking price reductions as home sit longer on the market

What’s not happened though is that because lending standards have remained relatively constrained, so we don’t have the funny money out there that we had in the last bubble so the tumble when it happens shouldn’t turn into a free-fall.  I don’t think we’re going to have a major crash as we did in 2008, but we’re going to have a cycle with rising inventories and sales slowing with prices moderating.

The Midwest is following, but to a lesser extent.  The Columbus, Ohio market is a good example seeing its first rise in unsold inventories in about eight years.  Prices have risen faster than previous booms so this market is now more sensitive to rising interest rates as it’s also pricing folks out of the market. 

New listings that flew off of the market in a day or two a few months ago are now sitting longer on the market.  Some of the softening is seasonal with kids back in school and colder weather, but I think it’s more than just that.  True, this market is far more linear than the historically cyclical Southern California market, but I think the Central Ohio market is also going to flatline for a while. 

Columbus housing report sept 2018

http://columbusrealtors.com/newsdetail/housing-report-918

I’m see early sign that the commercial market is also slowing a bit all over the country from commercial real estate in West LA and Santa Monica to most markets in the Midwest.  So, it’s time for a cycle.