Last updated on September 26th, 2018 at 08:49 pm

Last Updated on September 26, 2018 by

Most adults remember the housing bubble of the last decade.  Some of us remember the smaller bubble of the late 1980’s and early 1990’s.  A tremendous amount of wealth was earned and lost during the crazy days of multiple offers on property sales and the rapid appreciation followed by rapid depreciation of property.  Some people have not recovered from these two cycles and others have been big winners.

As you work out your financial situation on the way to retirement, housing for many is most important item on the list.  A question to ask is do you stay in place or move.  Depending upon the future of the housing market, your decision may change.  The following information can get you started on your search for answers.

As of the date this article was written, housing prices and the number of houses sold are dropping.  Not at the rate following the last decade’s debacle but at rates that are alarming some.  One thing to remember, just like politics, real estate is local.  There are no magic numbers that apply across the nation or the state or even in some cases a region.

The last two quarters prices have dropped!

Let’s start with a Case Schiller report that indicates that the price index of homes in 2017 hit the price index of 2007 at the peak of the housing boom.  For the last two quarters, prices have dropped and sales have slowed even during the busy summer months.  Sales volume dropped for the first time since the summer since 2014.  Larger market, prices have cooled and demand for homes is slowing.

I can attest to this fact that the market was slow this year.  Back in the Spring of 2018 that if I put my home on the market too soon it would be sold.  My move was planned for August and I decided to hold off marketing my home for that reason.  I finally listed in June and it seemed that someone turned off the money tap the minute that my home was listed.  The few months prior to my home being listed, sales were brisk and prices were going up.

I had to drop my price by 7%

I listed my home in the range of others using as most do, comps with adjustments.  It was not over-priced based upon the previous quarter.  In the end to sell, I had to drop my price by 7% to complete the sale.  What I was concerned about was the fact that Zillow was reporting many people looking at my home on their site.  Many people were looking at the 15 or so homes listed in my immediate area.  Just before I signed the contract, the number of people viewing all homes in the area dropped by about 50%.

Schools were back in session in early August that was one reason but according to My agent and others I spoke with, the drop off was unexpected, it was still July and it was very unusual based upon past summers even shortly after the market began creeping up.  At least the sales price was what I though to be reasonable although lower than the recent comps.

Sales to home flippers and international buyers are down.

Two factors may play into the slow market in some areas.  First, international buyers are fewer and far between.  Sales to that group are down by 21%.  Home flippers have in some cases found the cost of homes to flip has hitting an all-time high in some areas putting a squeeze on margins.  I recently sold an investment property in Las Vegas and received multiple offers from flippers.  They must have been desperate based upon the prices they offered.  I was not.

A startling fact is that according to the U.S. Census Bureau, Years of Median Income study, it takes 19.2 years of income to buy a home in the Los Angeles/Orange , ca area. It takes 11.5 years of income in Riverside, CA and 16.1 in San Diego.

In a State of the Nation’s Housing 2018 report from the Joint Center for Housing Studies at Harvard, only 47.4% of homes in Los Angeles/Orange County area owner occupied, the lowest in the 100 largest metro areas.  What this means to you is that if you plan to rent, there will be competition for rentals at higher prices.  76% of homes in Ocean Springs, MS, are owner occupied.  If you live in a condo or town home development be cautions, if the percent of rented units is too high, the government will not back mortgage loans.  This means you have to sell basically to a cash buyer.

If you are considering selling your property soon, perhaps you should look at your housing market and if you live in a large metro area such as Southern California, you can confirm that what I discussed above should be somewhat accurate.  Given that interest rates are on the rise, it will be more difficult to sell later than sooner.

Two similar homes, one $800,000 another at $300,000

One last study for your consideration indicated that the West Coast and some other large Metro Areas cost 5+ times the median income to buy a home compared to other markets such as the Gulf Coast at 3 times the median income.  A home in Orange County, CA may be valued at $800,000 and the same square footage on a similar lot or larger along the Mississippi Gulf would cost under $300,000.

Volatility in smaller markets is not as high.  There is a two edged sword here.  If you live in a high cost area your home price will generally increase at a faster rate creating more dollars of equity.  If you live on the Mississippi Gulf Coast, an area without volatility, your housing appreciation will grow at a lower rate.  Consider however, that what comes up must go down.  If it never went up fast, it is not as likely to go down fast.

Sell your home in the high volatility market, roll your equity into a home along the Mississippi Gulf Coast.  Some readers may have sufficient equity to pay cash for a home in Ocean Springs, Biloxi or other communities along the Mississippi Gulf Coast.  If you are retiring, consider living without a mortgage.  If you must have a mortgage, why not have a smaller one.

Is it time to sell?

The real estate market is cooling and the current cooling began at a faster rate than the last market down turn.   In many areas it’s now a buyers market.  Buyers, sellers and agents in larger markets are still adjusting their strategies.  I spoke with one agent who told me that he had to rethink what he will tell his clients since the change has come on so quickly.  Most may agree that there is no reason for panic but it is prudent to evaluate your individual position relative to the equity or lack thereof in your property.

According to a CNBC report dated January 11, 2018, sales of new homes nationally are off by 18%. The problem is more acute in Southern California where new home sales have recently fallen by 48%. According to the article, this situation happened last in 2013 before it finally corrected. Interest rates which have been going up for the previous few months fell back recently to about 4.5%. Every market is different, national numbers are only for interest. Our market on the Mississippi Gulf Coast is well balanced with just a bit more sellers than buyers. The days on market are stretching a but but sales are still closing.

A final point.  If property in your area has increased significantly over the past few years you may find fewer buyers. According to a number of studies the difference between the median house price and median salary in some areas is growing which is in turn reducing the number of potential buyers.  Watch the news, do research, salaries which are starting to creep up are not keeping pace with accelerating home prices, something will have to give.  With unemployment at an all time low you would think that employers would be offering higher wages but they are not in any appreciable numbers.