Why is the Real Estate Market Better than Expected?
The real estate market suffered last year when the Federal Reserve started raising interest rates to combat inflation. By June of 2022 mortgage rates hit 6%, more than double the 2.75% rates found in January. While 6% is good by historical standards many buyers no longer qualified at the new higher rates. Multiple offers started to disappear and price appreciation went flat. By December home values had slipped 10% and homes that had flown off the shelves were taking much longer to sell and price reductions were common. It looked like we were in a real estate downturn which normally last at least two years. Many experts believed home prices would slip further in 2023.
However, the new year started better off than expected. Homes started selling quicker, prices firmed up and the number of homes for sale remained low. The key was the number of buyers remaining and willing to purchase a home was greater than the number of homes for sale. Lack of inventory (homes for sale) caused prices to regain 5% in value and tilted in the seller’s favor again. I have talked to owners who would like to move but when they have a 3% mortgage rate, 6% is hard to swallow. Some buyers are using adjustable loans to qualify and hope to refinance at a lower rate later. Others are using mortgage rate buy downs for the first 3 years to help in qualifying. What does the future hold? Is the uptick in prices and seller’s market temporary or will it hold?
No one knows but right now is a great time to be a seller. If you are ready to move, there is no need to wait for the market to change.