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Housing has been one of the bright spots in the economy this year. This week, a report showed that home prices in the top 20 cities continued their robust upward march in August. There are also far fewer foreclosure sales and other signs of distress in the market.
But the Federal Reserve expressed concern Wednesday about the slowing housing market. Pending home sales fell far more than expected. And housing experts are bracing for some volatility.
Glenn Kelman, the CEO of the real estate website Redfin, says that all the recent national economic drama has made an impact on homebuying patterns.
First, there was talk of the Fed tapering its stimulus, which drove interest rates up. Then came the government shutdown and the political brinkmanship over whether the U.S. would default on its obligations. And more recently, with a decision about tapering and a fight over the nation's debt ceiling put off for at least several weeks, interest rates declined.
"Consumers are on a hair trigger," Kelman says. "The buyers that we talk to seem to read the papers. And one week they're hot, and the next week they're cold."
Lawrence Yun, chief economist for the National Association of Realtors, says fewer buyers are touring homes. He says that's mostly because homes are nearly 13 percent more expensive than last year.
They're more expensive for some healthy reasons. For example, there are fewer cheap, distressed homes available as the market works through the remnants of the financial crisis.
But Yun says home prices are also rising quickly because there's not enough inventory. "What I would like to actually see more is more inventory coming onto the market from more aggressive homebuilding, but that's not happening," he says.
It's not happening partly because small builders are having trouble getting construction loans from banks. And, there's a shortage of skilled labor in that sector.
"Interestingly, even with high unemployment, the builders are saying that there's difficulty finding construction workers," Yun says.
Redfin's Kelman agrees that inventory is the big question for next year, and that it will determine whether housing remains an economic driver. He notes that Wall Street investors snapped up many homes and turned them into rentals in recent years.
"The question next year is whether more sellers are going to come into the market," he says. "If you really want to see real estate drive more of the U.S. economy, you need more sales volume."
Overall, Kelman argues there's been a change in how people think about investing in homes because of the market's volatility.
"It used to be that real estate was a very stable investment," he says. "The middle class was very comfortable making it. Stocks were where all the volatility was. And now I think real estate has become just as speculative as any other class of investment."