Experts are saying that the opportunity to buy is now. That’s a statement that we don’t hear often that one time is better than another to buy. Aren’t there better times to buy, such as when it’s a buyer’s market or when rates are at a low, or when prices are lower? Homes for sale are a hot commodity right now, and prices, although softened, according to experts the price decline has bottomed out. Nationwide, while sales are declining, we are seeing home prices soften from about 2-5% but not plummet. The rate of appreciation has slowed but with the supply and demand factor, the data supports a continued appreciation of your investment. Record high mortgage rates historically have not caused prices to come down. The higher interest rates do price some homebuyers out of being affordable, but sales simply become depressed, instead of prices coming down.
The demand for homes still outpaces the number of available homes in most areas of the country.
This demand is a force that limits home prices going down. Home supply at 5-6 months is
considered to be a balanced market. The home supply is at 2.9 months as of January 2023. This
is figured by units available for sale, 970,000 inventory with; 690,000 “active listings” and units
needed, estimated at 1.62 million. Considering those under contract we have a 2 months supply.
According to the National Association of Home builders, which publishes the Housing Market
Index with Wells Fargo predicts a double digit decline in new housing start this year. When the demand for housing is high, but supply is low, home prices often rise.
Home prices are higher now than they were a year ago. Redfin, the real estate brokerage, predicts a decline by 4% in 2023. In the Great Recession house prices fell by 20%. There is a big difference between a crash and a price adjustment. Some experts expect to see the biggest price reductions in the higher home prices that just need to come back down out of the clouds. A 4% decline is more of a flattening than a price crashing in housing. Part of The Fed raising the interest rates was to help soften the housing market prices.
Mortgage rates began climbing in March 2022 and as of December 2022 the average 30 year was between 6.25%- 6.5%. according to the data provided by Zillow provided to NerdWallet. January 2023 per Freddie Mac, Rates are at their lowest level since September of 2022. The feds, since March, have raised the Federal Fund Rate by 4.25% to control inflation. This is a different rate than the mortgage rates. The federal fund rate is the interest rate that banks charge each other to borrower or lend overnight funds. Some of loans affected include short-term loans, such as credit cards, adjustable-rate mortgages, Home Equity Lines of Credit, including annual percentage yields you earn on savings accounts. Effectively the Federal Fund Rate dictates the cost of the money in the U.S. economy. In 2008 the Fed funds lowered to 0% hoping to revive the economy during the Great Recession. This was repeated in 2020 during Covid-19. This encourages consumer spending and activating the economy, by making it easier or less expensive to borrower money. Historically when inflation comes down, mortgage rates follow.
Competition has slowed, there are fewer offers and sellers are now entertaining buyers demands. Buyers that are in the wait for lower rates will enter a market with a higher demand for the same property, with less seller concessions, as you won’t’ be the only buyer that was waiting. The demand is already high compared to the supply available. Crystal balls are needed to see into the future of our industry, but following data driven sources and experts, can help give us a peek
Portia Vigil is a native of Delta, Colorado. She is a mortgage lender with Guild Mortgage and has fourteen years of experience working in the field as both a mortgage lender and a broker.
The above content is for informational and educational purposes only, readers should not construe any such information or other material as legal, tax, investment, financial, or other advice.