It's happening in larger, pricier housing markets: Buyers are starting to get fatigued, indicated by modest drops in existing home sales, mostly in competitive Western states like California and Washington.
From Seattle to the Silicon Valley to Austin, Texas, headlines point to a cooling as housing inventory creeps up and prices continue to outpace wage growth, squeezing out fed-up buyers.
Is this trend about to hit the Lehigh Valley housing market? Most indicators say no.
Or at least, not yet.
"The sky is certainly not falling," said Brad Patt, senior vice president of Berkshire Hathaway HomeServices Fox & Roach Realtors. "We don't see the huge peaks and valleys that they see in huge markets like California and New York. In the Lehigh Valley, we have more of a consistent market."
The latest monthly report from the Greater Lehigh Valley Realtors group tells a familiar refrain: continued growth in demand marked by tightening inventory and rising housing prices.
But one data point raises the question of how long the song can go on: affordability.
July marked the second month in a row in which the housing affordability index has hovered at levels last seen during the Great Recession.
Meanwhile, the median sales price in July stayed at June's record-breaking high of $225,000, which is an 18.5% increase from last July.
Inventory continued its downward trajectory, landing at 1,601 in July, a decrease of almost 36 percent from a year ago.
The affordability index was at 139 — a higher number means greater affordability — meaning the median household income is 139% of what is necessary to qualify for the median-priced home under current interest rates. This is down about 20% from last July, and it is the lowest since 2008, according to the Realtors group report.
But today's index levels exist a much different context, Patt cautions.
"It's a much more secure and positive economic environment than existed in the recession period," he said.
In 2006-07, when affordability index levels were also around 140, several factors pointed toward a recession: a volatile stock market, plummeting unemployment and skyrocketing home prices, said Sean LaSalle, president of the Realtors group.
It's different this time. Homes are appreciating at better rates, leading to improved buyer confidence unhampered by recent small increases in interest rates, Patt said.
LaSalle, an associate broker with Berkshire Hathaway, said he thinks the Federal Reserve — in looking at the affordability index figures — will decide to hold interest rates steady in the short term.
Pending home sales were down 8% in July, but this is more likely a result of the low inventory levels than the affordability factor, Patt said.
Economic growth should encourage more listings to come on the market soon, LaSalle said, and then the affordability index can swing back up to a more level playing field.
In other words, it's a necessary part of the cycle. Other short-term predictions are part of it, too: The region may see more new listings and a smaller jump in sales price, LaSalle said, but this is what usually happens in August and September.
"We need this," LaSalle said. "If we see something alarming, everyone will know about it."
