THE SHIFT IN HOUSING DUE TO HIGHER RATES HAS ALREADY MADE A SIGNIFICANT IMPACT ON THE HOUSING MARKET, AND IT WILL SLOW FURTHER OVER THE SUMMER.
With a higher-than-expected Consumer Price Index report that just came out last week, according to Mortgage News Daily mortgage rates leapt from 5.5% on Thursday, June 9th, to 6.13% on Monday, June 13th, an enormous, extraordinary jump. They were at 3.25% at the start of the year and have escalated by nearly 3 points since. The higher rates have already had an enormous impact on housing so far this year, and the recent rise will only further slow the market. Rates are rising in anticipation of everything that the Federal Reserve will need to do in order to tamp down stubborn inflation.
Higher rates dampen demand, homes take longer to sell, and market times grow longer. Today’s demand is muted compared to last year, down 34%, and the 3-year average prior to COVID (2017 to 2019), down 27%. Fewer buyers qualify to purchase at today’s higher rates, so there are not as many buyers bumping into each other. As a result, the inventory has more than tripled so far in 2022, growing from 965 homes to start the year to 3,059 today. The Expected Market Time (the amount of time between hammering in the FOR-SALE sign to opening escrow) has blossomed from 20-days at the end of March to 45-days today, still a Hot Seller’s Market (less than 60-days), just not an insane, instantaneous pace. Many homeowners are not finding success. Incredibly, 36% of all current active listings have been exposed to the market for at least one month. Sitting on the market for over 30 days is to be expected in the luxury ranges, yet there are plenty of sellers having trouble selling in the lower ranges as well. Between 28% to 36% of all homes priced below $2 million have been listed FOR SALE for more than 30-days and are still waiting for the right buyer to bring an acceptable offer to purchase. Not as many sellers have been on the market for more than two months, but that will change as housing continues to slow over the coming summer months.
Attention Sellers: Sharpen your pencils, scrutinize all comparable data, and price your home so that it will sell.
Do not learn the hard way that this market is not the same as the frenzied market of the past two years.
Attention Buyers: There are finally more choices, but if a home is priced well, it will not last. Do not mistaken a slower market as a Buyer’s Market.
It is still a Seller’s Market. Buyers looking to negotiate should consider homes that have been on the market for a while and are having trouble securing a buyer willing to make an offer to purchase.
