I like to keep my circle as up to date on the real estate market, as I can. Because let's face it, even if you're years or even decades away from making a move, everyone likes to talk about real estate! This information will help you stay up to date, and maybe even potentially help someone you run into at that next summer cookout.
Back in my Spring newsletter, I talked about the brief lull in the Winter market, as interest rates went up quickly and buyers took a big step back. I also spoke about how many of those buyers re-entered the market around February and that there was an increasing demand issue that looked all too familiar. My big concern then, was that sellers would be reluctant to sell because they wanted to hold onto their low interest rate. Basically, every new buyer or long time home owner took advantage of refinancing over the past couple of years, in some cases more than once, to get their rate to historic lows. What that left us with was a BIG problem!
My concern then has played out exactly as I feared. Homeowners looking to upgrade to their second or third home have been very reluctant to move. I have had many calls this Spring and Summer from sellers that were curious about possibly selling, but then decided against it once they realized they would have to trade in their 2.8% interest rate for something closer to 7%. The result has been a much slower Spring market than we are used to around here. One could argue that we never actually even saw a Spring market! In some cases, nationwide, there have been over 50% less transactions this year, than last. One has to wonder if the FED needs to revise their rate plan?
The theory was that as rates went up, prices would come down. Well, what has happened is rates have gone up and sellers are sitting tight, once again creating fierce competition on the few homes that are for sale. Buyers haven’t left the market like many have predicted, because the rent increases have gone hand in hand with the rate increases. Add this all up and…you guessed it-rising home prices! A first-time home buyer putting less than 10% down on an entry level home and will likely be paying over $4,000/month! That’s the bad news…but here is some good news.
People's lives, needs and wants change over time. Interest rates are a hot topic and there is a big time "settling in" process going on right now, as we all adjust to such a drastic change. I am predicting that as the interest rate topic begins to cool and that adjustment period has gone through its due process, those sellers that are holding will begin to sell and the natural course of the market will begin to play out. This could bring a sudden surge of homes in a short window, especially if sellers start to hear about a potential slow down or leveling of the market. Bottom line is, those homes will eventually come…the question is when? I’m starting to get the feeling that next Spring could be a big one around here, especially if rates settle in around 5.5%.
To the buyer worried that they are buying at the "top of the bubble," (I have heard this every year for the 8 years I’ve been selling real estate 🙂) fear not! We are very lucky to live in such a desirable part of the country. Our communities offer the beauty of the changing seasons, vacation spots that are only a drive away, unique and trendy neighborhoods with vibrant downtowns, a short drive to city life and so much more-all things the modern buyer is looking for. That makes ours one of the safest Real Estate markets around. I will always be an advocate for purchasing over renting. Renting will always be 0% towards any equity and wealth.
The market is changing quickly around here so as always, please never hesitate to reach out to me to get the latest. I would love to hear from you!
Nick Motsis
