Is the Housing Marking Shifting?

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06/15/2022

 
 

Is now a great time to buy a house or is it still a seller’s market?

My answer to this question is the same as what I shared in my April article: The reality is, the way the market works is you are either 1) selling high and turning around and buying high or 2) selling low and turning around and buying low. 

At the time I wrote that article, we were experiencing extremely low interest rates on mortgages and a very competitive market for buyers. It was common to see houses have multiple offers on the first day on market. A buyer had about 15 minutes to make a decision on whether this was their dream home and to make an offer.

Here we are 3 months later and interest rates on mortgages are about 2% higher.

I believe interest rates will likely be at least another 1% higher by August and continue to rise until there is clear evidence of inflation slowing down. 

Will we see a shift to more of a buyer's market? If so, what does that really mean for you as a potential buyer or seller?

The first and obvious reality is the cost of borrowed money is substantially higher.

The rate of mortgage applications is down across the country and many buyers have dropped out of the race for their first or next home, lowering the demand for houses. Whenever we have less buyers in a market, we will see downward pressure on prices. Before you get excited about lower prices, we need to remember this is relative to where it was in March where we had multiple offers sending prices substantially over asking price. Don’t forget, we still have a supply problem. 

Increasing the supply of houses will also create downward pressure on prices, but builders are facing their own set of problems with the availability and cost of building materials. I don’t see the builders over supplying the market anytime soon. There is too much risk on their end to build an expensive product that buyers can’t afford or choose not to purchase because their cost of money is so much more. Remember you first time purchasers - it’s still cheaper than renting. 

The next impact of less buyers in the market, which is already happening, is a higher number of days on market for listed houses.

Longer days on market opens up negotiations, which you want to avoid at all costs. Correctly-priced houses that are in great shape will still move quickly and that’s why it’s best to work with a realtor to ensure you move through the process swiftly and confidently, and receive the best offer possible. 

For the 12-month period prior to April 2022, sellers could get away with listing their imperfect houses and buyers were even waiving inspections all together. Now, it’s very likely inspections will be on the vast majority of offers and that buyers will ask sellers to fix anything that comes up in the inspection prior to closing on the home. 

The local housing market is shifting faster than most people thought it would and I want my clients to be as prepared as possible.

I don’t believe prices on homes will come down substantially because there won’t be any catalyst that causes an extremely higher number of sellers than buyers. I think it’s more likely that people will choose to stay in their homes and we’ll continue to have a supply problem for the foreseeable future. I would love to help you navigate the challenges of any market we may be experiencing. You can reach out to me here or sign up to receive future articles from me like this one here.