Homebuyers have been feeling it for over a year now. It's been absolute carnage when shopping for a new home, but with the recent rise in rates, home prices are are taking a hit... well kind of. Keep reading...
Who's in control now?
Great question. As of today, we are still in a Seller's market, but things have begun to change. My team handles hundreds of purchase transactions a year and within the last 2 weeks I've seen home buyers not only be able to negotiate on price, but actually walk with some money back from the Seller. Now don't get too excited... part of this change is the euphoric listing price of homes and Buyers simply calling their bluff; however the lack of rampant multiple offers and escalations, we are seeing buyers starting to get their way more.
But the data!
I know... the data still shows that home prices are sky rocketing and that Sellers are in the driver's seat. July 2021 was the fourth straight month to hit a record for home price growth with a 19.7% annual gain. June was sitting at 18.7%. Now while those numbers are incredibly high, remember that these reports and their index lags about 2 months. Add the on average 30 days to close on a loan, and you now have a 3 month lag time. So what we are really saying is that this market was SUPA-HOT 3 months ago! And you would be right.
That was then, this is now.
What has been offsetting (and enabling) the immense increase in home prices are the historically low interest rates we continue to see. However, the last Freddie Mac 30 Year Fixed Rate average finally jumped back above 3%, hitting 3.01% for the first time since July of 2020. Freddie Mac's analysts believe this rise in rates will continue. "We expect mortgage rates to continue to rise modestly which will have an impact on home prices, causing them to moderate slightly after increasing over the last year."
Allow me to translate. Since mortgage rates are going up, the housing market will suffer.
The already dried up pool of buyers who threw in the towel months ago are now renting. This combined with increased rates making the already over-priced homes even more expensive, well now that's a double-whammy of epic proportions. As rates continue to rise, I predict we will see one last run to the well of both buyers jumping in to buy and sellers willing to bargain their home again. It's already happening. The bad news is when even higher rates hit the rate sheet, current home prices will make it too expensive for the majority of the interested buyer pool. This will force sellers to accommodate. Enter Buyer Market 2022.
Get in while you can.
Rates are still low and Sellers are starting to negotiate. It's a beautiful combination. If you want to talk about anything mortgage, you can chat with me HERE.
Happy hunting! ~Rick Elmendorf (About Rick)