Overheated US real estate market begins to cool

New York

THE pandemic created a frenzied real estate market in much of the United States that has yet to let up, with demand for housing still outpacing the number of homes coming on the market, giving sellers a heavy upper hand in most of the country.

But, economists say the market cooled off a bit in July - perhaps a sign that the wild price appreciations of the past year may have scared off some buyers who prefer to wait until things calm down, to stay put or to continue renting.

Nationally, US median home prices held steady from June to July at US$385,000. That's up 10.3 per cent from last year at this time, according to the latest data from Realtor.com.

It is slower growth than the 12.7 per cent increase in June 2021, and it marks the third month in a row in which the year-over-year gains have slowed.

"There's a lot of buyer sticker shock," said John Burns, CEO of John Burns Real Estate Consulting, based in Irvine, California. "People who are a little more investment oriented or who maybe already own a home have pulled back."

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It may also signal the return to a normal seasonal dip with many schools back in person and delayed summer vacations finally underway.

Economists say the Delta variant's impact on housing will likely be to accelerate the hybrid and work-from-home trend that is driving buyers with the means to do so to upgrade to larger houses - a trend that often takes people farther from the urban core or to less expensive cities. And interest rates remain low, another factor in surging housing demand.

Danielle Hale, Realtor.com's chief economist, said last month's slower price growth was skewed because a larger share of smaller, entry-level homes hit the market compared to a year prior, bringing the median price growth down overall. But a typical 2,000 sq ft (185.8 sq m) home still saw brisk price appreciation, up 18.7 per cent from July 2020.

The most dramatic price appreciation happened in Western states and in suburban and exurban areas where buyers are looking for larger, single-family houses and relatively affordable prices.

Prices were softest in the Midwest and the Northeast, according to Realtor.com.

Nationally, the average home took 38 days to sell in July, up slightly from 37 days a year ago, according to Realtor.com. The number of homes listed for sale was up 6.5 per cent in July compared with last year. NYTIMES