Those considering purchasing a home in Norman before the end of the year should remain prepared for bidding wars despite recent signs of slowed market activity, local experts say.
Last month in Norman, new home listings declined from 290 to 252. The estimated time it would take to sell existing inventory remains at 1.2 months, data from Multiple Listing Service, a database for the real estate market shows.
Following a $10 jump in price per square foot for a Norman house to $132 in May, the price has held relatively steady this summer, according to local MLS data.
This slight slowdown comes after more than a year of housing markets heating up nationwide and locally. This was due to stimulus payments for COVID-19 relief and intervention from the Federal Reserve through the purchase of bonds composed of loans bought from banks. This allowed banks to serve as intermediary between the homebuyer and the investment industry, according to Marketplace.
This allowed banks to lend more money at lower interest rates, Marketplace reports.
Rob Schaerer, broker and associate of Dillard Group Real Estate, said the appreciation rate for homes is likely normalizing. He said stories of bidding wars resulting in paying over list price has intimidated some buyers, resulting in pull backs until the market becomes more attractive to them.
In April, a house might get 10 to 15 offers, but in recent weeks it might get four to five, Schaerer said.
“I know I’ve had a couple buyers drop off that were just wanting to sit and watch the roller coaster instead of ride it for a little while,” he said.
Schaerer said people with this mindset generally expect the market to return to a more favorable state for buyers. But in and around the Oklahoma City metro area — the 9th most affordable housing market in the U.S., and one of 14 cities to grow by 100,000 people or more in the last decade — he’s not certain that will happen.
“It could, but if we’re increasing population at a rate that’s faster than we can build houses or accommodate it, then there’s only one thing that can happen, and that’s for the prices to increase,” Schaerer said.
Schaerer expects potential buyer focus in the fall months to deviate from the housing market, presumably due to kids going back to school and schedules changing. This could mean an extended plateau on demand through year’s end, he said.
Cody Simmons of Sunshine Realty said he has seen the Norman and Noble market slow recently, but the overall pace is still fast.
“There’s still multiple offers for properties,” Simmons said.
Simmons said the biggest obstacle for clients navigating the current market usually involves contingencies, or clauses included in the Agreement of Sale that must be fulfilled in order for a home purchase to move forward.
He said contingency issues arise often with those who have to sell their property before having the ability to purchase another home.
“If you were selling your home, and you had somebody that was able to purchase right now, versus another potential buyer that had to wait to sell their current property, then you would take the one without a contingency,” Simmons said.
A Realtor.com report published this week shows the 2021 homebuying season has aligned with seasonal patterns seen before COVID-19. The best time to buy a home is the week of Oct. 3, according to the report.
While outbidding competition could mean paying above the listed price for a home, buyers could still find value in their purchase through the low interest rates. Fannie Mae, a government-sponsored enterprise for mortgage financing, and the National Association of Realtors predict interest rates will stay below 3% until January.
Gil Barteau, executive vice president at First Liberty Bank, said lender activity in the last 18 months has been unprecedented.
“We have not seen it let up, and over the last three weeks, we’ve seen a surge in applications for purchase loans,” Barteau said. “We’re as busy as we’ve ever been.”
Barteau said the rates buyers are receiving are historically low. He said they’re unlikely to spike locally in the coming months, but inflation is the wild card.
The August Bureau of Labor Statistics Consumer Price Index report shows the cost of goods and services rose 5.3% over the last 12 months. The National Association of Realtors expects consumer price growth to average 4.5% in 2021.
If inflation is short-lived, Barteau it will not raise rates to a significant degree, but if it’s perceived to be more permanent, theoretically, rates could jump.
When the Federal government decides to stop purchasing $40 billion in mortgage-backed securities every month, interest rates will likely rise, he said.
“They’re hinting that it could be early 2022, but they’ve also expressed it could be late 2022,” Barteau said.