Bidding Frenzy Cools Down

Bloomberg reports that due to the high mortgage rates and home prices, the buying frenzy that occurred just recently, and most especially in states like California, Arizona, and Nevada, has now started to cool down. The National Association of REALTORS also states that the first time since 2011, the inventory levels of homes that are unsold rose last September from a year earlier, back in 2012. “We are shifting from a frenzy to where buyers are taking a step back and being more analytical and unwilling to just make rash decisions,” states economist from real estate brokerage Redfin, Ellen Haberle. There are two major points that could explain the unusual low rate of home sales this season. Although there naturally is a seasonal drop-off that occurs during this time of year, housing experts say that the government shutdown and the increase in mortgage rates may be to blame. The government shutdown has weakened consumer confidence as Michael Orr states, a director of the Center for Real Estate Theory and Practice at Arizona State University states in a recent telephone interview for Bloomberg. And the increase in mortgage rates up a complete percent point has led to an increase in borrowing costs that has become a main reason to hold home buyers back from purchasing. It is also said that this bidding war is creating a false market for people, as stated by Mike Imgarten, civil engineer, interviewee for Bloomberg. He also says that since everything is starting to cool and slow down, it’s now the proper time to jump back in and check the real status of things. Source: “Bid Wars Wane in U.S. Housing Markets on Supply Rise: Mortgages,” Bloomberg Businessweek (Nov. 14, 2013)