In the realm of real estate, the significance of location has always been emphasized with the popular adage: “location, location, location.” However, in recent times, a new mantra has emerged, capturing the attention of industry professionals and homeowners alike: mortgage rates, mortgage rates, mortgage rates. This shift in focus can be attributed to the Federal Reserve’s efforts to combat inflation through a series of interest rate hikes.
The impact of higher mortgage rates was immediately felt in the form of reduced affordability for homebuyers, leading to a decrease in demand within the housing market. Yet, as this year unfolds, we are witnessing further consequences. Contrary to analysts’ expectations of an increase in listing inventory due to declining sales, homeowners are opting to delay their plans to sell. Their rationale lies in their attachment to the more favorable, lower mortgage rates they currently enjoy.
With reduced demand and a scarcity of available properties, it’s natural to wonder about the effect on home values. Additionally, we yearn to gain insights into what lies ahead for the real estate market in the upcoming months and years. To shed light on these pressing questions, let’s explore several key indicators that paint a vivid picture of the current market landscape and offer clues about its potential trajectory.
HOME SALES ARE EXPECTED TO INCREASE IN THE NEAR FUTURE
As the seasons transition into spring and summer, it’s not just the weather that starts to heat up – the real estate market typically experiences a surge in activity during this time. However, this year’s peak season had a slow start, with noticeable declines in sales during March and April. In fact, existing home sales in April were down 3.4% from the previous month and a significant 23.2% from the same period last year.
What factors are contributing to this market slowdown? Industry experts point to several key elements, including near-record high home prices, elevated mortgage
rates, and limited inventory. Lawrence Yun, the Chief Economist of the National Association of Realtors (NAR), explains that home sales are attempting to rebound but are greatly influenced by fluctuations in mortgage rates. Additionally, the prevalence of multiple offers on starter homes indicates a greater need for increased supply to meet the existing demand. It’s truly a unique housing market scenario.
Despite the challenges, there is optimism among industry experts that the market will rebound. The Mortgage Bankers Association (MBA) forecasts a continued decline in home sales throughout the third quarter, followed by a gradual upturn in the fourth quarter and into the next year. On the other hand, analysts at Fannie Mae anticipate a slightly longer recovery period, with the market gaining momentum in early 2024. Encouragingly, home builder confidence is already on the rise, as demonstrated by the surge in purchases of new single-family homes in March and April, reaching a 13- month high. Builders are using incentives to stimulate sales, with 54% of them employing these tactics to attract budget-conscious buyers, as reported by the National Association of Home Builders in May.
So, what does all of this mean for you?
The slower pace of sales offers prospective buyers some breathing room. If the frantic pace of the real estate market during the pandemic era was overwhelming, now might be an opportune time for you to search for your dream home. We are here to assist you in assessing your options and making an informed purchase decision.
For those planning to sell their homes, it’s important to be prepared for reduced foot traffic and a longer sales timeline compared to a year ago. Engaging the services of a skilled agent who knows how to attract buyers becomes even more crucial. Reach out to us for a copy of our comprehensive Property Marketing Plan, designed to maximize exposure and increase your chances of a successful sale.
PROPERTY VALUES REMAIN RELATIVELY STABLE
Here’s some positive news for home buyers: While home builder sales showed an increase in April, the median price of new houses dropped to $420,800, marking an 8.2% decrease compared to the previous year. Similarly, the median price of existing homes fell to $388,800, reflecting a 1.7% year-over-year decline. It is worth noting that
while existing home prices rose in certain parts of the country, they experienced a decrease in the South and West regions.
According to Lawrence Yun, roughly half of the country is experiencing price gains, and multiple-offer situations have returned during the spring buying season following a calmer winter market. Distressed and forced property sales are virtually nonexistent, contributing to a more stable pricing environment.
The average national home price remains approximately 40% higher than it was in early 2020, as reported by the S&P CoreLogic Case-Shiller index. Despite a slowdown in sales, a limited housing supply has helped sustain prices.
Doug Duncan, the senior vice president and chief economist at Fannie Mae, stated in an interview with Yahoo Finance in April that while the extent of price fluctuations may vary from region to region, national home prices are projected to experience a modest decline of around 1% to 1.5% by the end of the year.
Mark Zandi, the chief economist at Moody’s Analytics, highlights the significant role of record levels of home equity in stabilizing the real estate sector and preventing a wave of foreclosures, even as prices moderate. In an article for The Washington Post, Zandi emphasizes that homeowners who have owned their homes for more than a year or
two can still count on their properties as solid investments. Restoring affordability is crucial not only for the financial well-being of households but also for the overall health of communities and the broader economy.
What does this mean for you?
Prices have softened in certain market segments, presenting opportunities for motivated buyers to negotiate favorable deals. We are here to assist you in finding your next home and securing a great price through our expertise in the market.
If you are a homeowner, although the surge in home values has slowed down, it is likely that you still have accumulated a substantial amount of equity. Feel free to reach out to us for a complimentary assessment to determine the current value of your home.
Additionally, the moderation in property values brings about certain implications for both buyers and homeowners. For prospective buyers, the softening prices in specific market segments present a window of opportunity to enter the real estate market and secure a home at a more affordable price point. With motivated sellers willing to negotiate, now is a favorable time to explore available options and make a wise
investment decision. Our team can guide you through the process, providing valuable insights and helping you navigate the market dynamics to find the right property at the right price.
As a homeowner, while the rapid appreciation in home values has eased, it’s important to recognize that you are likely sitting on a considerable amount of equity. This equity represents a valuable asset that can be leveraged for various purposes such as home improvements, debt consolidation, or future investments. By taking advantage of our free assessment, you can gain a comprehensive understanding of your home’s current market value, enabling you to make informed decisions about your financial plans.
Overall, the stabilization of property values indicates a more balanced and sustainable real estate market. While prices may experience slight fluctuations in the coming months, the presence of solid home equity, along with ongoing demand for housing, ensures a solid foundation for homeownership. Whether you are a buyer seeking a favorable deal or a homeowner looking to leverage your equity, our team is committed to providing the expertise and personalized guidance you need to navigate the evolving real estate landscape.
Remember, real estate remains a resilient and long-term investment that can yield substantial returns. By staying informed, working with trusted professionals, and taking advantage of the opportunities presented by the current market conditions, you can make strategic moves that align with your goals and aspirations.
Reach out to our team today to explore how we can assist you in making the most of the stable property values and the broader real estate landscape.
WHERE IS THE TREND HEADING?
In the current real estate landscape, we observe a notable trend: while listing inventory remains low, the construction of new homes is on the rise. This dynamic creates an interesting balance in the market, with implications for both buyers and sellers.
According to data from the National Association of Realtors (NAR), unsold existing home inventory saw a 7.2% increase from March to April. However, even with this rise, the supply level still falls significantly short of what is considered a “balanced” market, standing at a mere 2.9 months of supply compared to the desired 5 to 6 months. This scarcity of inventory can be attributed to many potential sellers who are reluctant to give up their existing lower mortgage rates. Danielle Hale, chief economist for Realtor.com, highlights that affordability concerns affect not only first-time homebuyers
but also repeat buyers who are still reliant on securing a mortgage. In fact, a recent survey conducted by a home listing site revealed that 82% of respondents planning to buy and sell homes feel “locked in” by their current low interest rates.
However, amidst this limited inventory scenario, new home construction is playing a crucial role in bridging the supply gap. National Association of Home Builders Chief Economist Robert Dietz notes that approximately one-third of the housing inventory currently consists of new construction, a significant increase compared to the historical
average of just over 10%. This surge in new construction is a welcome development and is expected to alleviate the supply constraints. Moreover, recent data indicates a positive trend in this aspect, with single-family housing starts experiencing a 1.6% rise from March to April (seasonally adjusted), while new construction permits have reached a seven-month high.
So, what does this mean for you?
For prospective buyers, while inventory remains tight, the reduced competition offers an advantage in terms of increased choice and enhanced negotiating power. If you have previously encountered difficulties finding a suitable home, now might be an opportune moment to revisit your search. Our team is here to assist you in exploring both new construction and existing homes available in our area, ensuring you find the ideal property that meets your needs and preferences.
On the other hand, sellers currently enjoy a less crowded market, offering a favorable environment for their listings. However, it is crucial to consider that as time goes on, the competition may intensify. If you find yourself hesitant to list your property due to the allure of your existing lower mortgage rate, it is worth contemplating the potential benefits of leveraging your equity gains as a down payment on your next home. By doing so, you may be able to lower your monthly payments and take advantage of the current market conditions. We encourage you to reach out to our team to discuss your options and devise a strategic plan that aligns with your goals.
In summary, although listing inventory remains tight, the rising trend of new home construction offers hope for a more balanced market. Buyers can seize the advantage of reduced competition, while sellers should consider the potential benefits of listing sooner rather than later. Our dedicated team is ready to assist you in navigating the nuances of the current real estate landscape, ensuring you make informed decisions that align with your aspirations and financial objectives.
Don’t hesitate to contact us to explore the opportunities available to you.
GOOD NEWS-COMING TO A REAL ESTATE MARKET NEAR YOU!
There is promising news on the horizon for potential homebuyers: mortgage rates may finally see a downward trend. According to data from Freddie Mac, the average 30-year fixed-rate mortgage reached its peak at 7.08% in the fourth quarter of 2022 and has since fluctuated between 6% and 7%. However, experts suggest that rates could potentially decrease later this year.
Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), expressed optimism, stating, “Calmer inflation means lower mortgage rates, eventually.” Yun believes that mortgage rates slipping below 6% by the end of the year is highly likely. Other leading economists share this sentiment. Fannie Mae, in its May forecast, speculates that 30-year fixed mortgage rates will continue to decline, averaging 6.0% in the fourth quarter of 2023 and 5.4% by the fourth quarter of 2024.
The Mortgage Bankers Association (MBA) predicts an even faster decline, with rates averaging 5.6% by the fourth quarter of 2023 and 4.8% by the fourth quarter of 2024. On May 3, the Federal Reserve raised its benchmark borrowing rate by another quarter point, marking its 10th consecutive increase since March 2022. However, the Fed’s corresponding statement omitted previous language about “additional policy firming,” leading analysts to speculate that the rate hikes may be coming to an end. While mortgage rates are not directly tied to the federal funds rate, a pause in rate increases by the Fed could have a positive impact on mortgage rates. In the meantime, prospective buyers should explore multiple lenders to secure the best rate and be prepared for a potentially exciting journey ahead.
So, what does this mean for you?
A potential decrease in mortgage rates would be excellent news for buyers, as it improves affordability. However, a decline in rates could also result in increased competition and potentially higher prices. By starting your search now, you will be ready to make an offer when the timing is right. Our team is here to assist you in negotiating a great deal and exploring potential seller incentives.
If you are planning to sell your property, this news also works in your favor. However, there are various factors to consider when determining the optimal time to list your home. We encourage you to reach out for a consultation, as our expertise will help you navigate the market and chart the best course of action.
In summary, there are positive indications that mortgage rates may finally see a decline, which is favorable for both buyers and sellers. By staying informed and partnering with our experienced team, you can capitalize on the potential opportunities presented by this evolving market. Contact us today to discuss your specific needs and goals.
WE’RE HERE TO GUIDE YOU
With The Walseth Team, we understand that real estate is a localized market, and the dynamics can vary significantly from one area to another. As experts in our local market, we are here to provide you with the guidance and insights you need to navigate through the intricacies of our specific real estate landscape. Whether you are contemplating buying or selling a home, our team is dedicated to helping you make informed decisions that align with your unique goals.
National real estate forecasts may offer a broad perspective, but we recognize the importance of diving deeper into the local market conditions that directly impact your neighborhood. Our in-depth knowledge allows us to identify the factors that are likely to influence sales activity and drive home values in your area.
If you are considering buying a home, we will take the time to understand your preferences, budget, and lifestyle requirements. Armed with this information, we will work together to develop a personalized action plan that aligns with your needs. Our goal is to guide you through the buying process, ensuring that you have access to the latest market data, property listings, and expert advice.
For those looking to sell their home, our expertise will be invaluable in helping you position your property effectively in the local market. We will conduct a thorough assessment of your home, taking into account its unique features and market conditions. With our guidance, you can optimize your selling strategy, attract qualified buyers, and achieve the best possible outcome.
To get started on your real estate journey, we invite you to reach out to us and schedule a free consultation. During this meeting, we will listen attentively to your needs, answer your questions, and provide you with a comprehensive overview of the current market conditions in your area. Together, we will create a tailored plan that empowers you to achieve your real estate goals with confidence.
We are committed to delivering exceptional service, personalized attention, and unparalleled expertise. Let us be your trusted partner as you navigate the exciting world of real estate. Contact us today to embark on a successful and rewarding real estate experience.
The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.
Sources:
- National Association of Realtors –
https://www.nar.realtor/newsroom/existing-home-sales-slid-2-4-in-march 2. National Association of Realtors –
https://www.nar.realtor/newsroom/existing-home-sales-faded-3-4-in-april 3. Mortgage Bankers Association –
https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/ 2023/mortgage-finance-forecast-may-2023.pdf?sfvrsn=4bf1d1a7_1 4. Fannie Mae –
https://www.fanniemae.com/media/47006/display
- U.S. Census Bureau –
https://www.census.gov/construction/nrs/current/index.html
- National Association of Home Builders –
https://www.nahb.org/news-and-economics/press-releases/2023/05/lack-of existing-inventory–boosts-builder-confidence-to-key-marker
- New York Times –
https://www.nytimes.com/2023/04/29/business/spring-housing-market.html? 8. Yahoo Finance –
https://finance.yahoo.com/news/mortgage-rates-increase-after-weeks-of declines-160015631.html
- The Washington Post –
https://www.washingtonpost.com/business/2023/04/22/housing-prices-put some-out-of-the-market/
- CNBC –
https://www.cnbc.com/2023/04/20/home-sales-fell-in-march-amid-volatility-in mortgage-rates.html
- Realtor.com –
https://www.realtor.com/research/2023-q1-sellers-survey-btts/ 12. National Association of Home Builders –
https://www.nahb.org/news-and-economics/press-releases/2023/04/lack-of existing-inventory-continues-to-support-builder-sentiment
- United State Census Bureau –
https://www.census.gov/construction/nrc/pdf/newresconst.pdf 14. Freddie Mac –
https://www.freddiemac.com/pmms
- National Association of Realtors –
https://www.nar.realtor/blogs/economists-outlook/instant-reaction-inflation april-12-2023
- CNBC –
https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html