What the heck is going on with the real estate market?
Mortgage rates have risen in recent weeks, so would-be buyers are feeling the pinch, and you’d expect that to impact housing prices. However, home prices and purchase-loan applications are also up simultaneously.
That’s really odd. Here’s what one economist had to say about it…
“The impact of the Fed’s inflation-curbing strategy is seen clearest in the housing market as prospective buyers take a big step back, slowing sales,” Redfin Deputy Chief Economist Taylor Marr said in the report. “The irony is that it may take renewed fears of a recession to bring buyers some relief in the form of lower prices.”
So what’s going on?
There’s still no significant inventory, and buyers (regardless of rates) don’t have enough leverage to drive prices down in major job markets.
What’s holding inventory back?
Homeowners with low rates have little appetite to trade their current home (and rate) for another home with a much higher mortgage rate, not to mention the chronic under-supply of homes in major job markets.
Even with all this talk of pivoting to a buyers market, nationally, the market has just shy of 3 months of inventory. Traditionally, you must get to 6 months for prices to start favoring buyers.
So the balance of power is trending toward buyers but still has a long way to go to tip the scales. Of course, these interest rates may finally move the needle for good if they don’t stabilize.
Another interesting development to watch is how quickly sellers and agents adjust their marketing tactics to the new environment. Gone are the days of intentionally underpricing the market or pricing at an absurd ask. Savvy sellers take a page from yesteryear and ‘RIGHT PRICE” their home from day 1. This should keep inventory from piling up.
Bottom Line
So get your popcorn ready it should be interesting to watch which market force wins in the coming months ahead.
PS - Still ok to buy in this market. Just be careful and make sure you are planning for 7-10 years or more so you can ride through temporary market adjustments.
