Normal is defined as conforming to a standard, usual, typical, or expected.
As we begin March, there is little in this spring’s mortgage or real estate markets that is likely to conform to expectations. It will probably not be the usual, typical, or anything like we should expect. The concerning part is that we might not even notice.
How would we not notice? Homes that get listed will sell. Interest rates will remain affordable for most. Home prices will likely increase, but maybe not as quickly as they have. It is what we won’t see that is troubling. It will be those things below the surface that won’t be normal.
High demand will push home prices higher, as it did for most of 2017. That demand will have listings selling in more than acceptable time frames. But that demand is a function of record-low supply which has pushed prices far faster than income growth. That can never become the norm. Pending home sales fell 4.7% in January compared with December. Sales of new U.S. single-family homes fell for a second straight month in January.
Higher mortgage rates have and will continue to take away some buying power. Paired with higher home prices, that means buyers in the market will buy—but are likely settling for less than what they expected when they started shopping. That can’t become the typical consumer experience. Eventually expectations will be tempered as consumers adjust to the market, but that will take a while.
We are likely looking at a new normal forming in the market. But that new “normal” may be that nothing conforms to a standard and you’ll never know what to expect from home buying season to home buying season.