Real Estate Weekly News: The Impact on Buyers and Sellers
Let’s begin by reviewing last weeks key real estate headlines:
- New construction housing starts fell 2% last month, despite a prediction of an increase of 1.4% (Census Bureau)
- “Higher mortgage rates and heightened economic uncertainty cooled borrower demand in June, leading to new-home purchase applications declining to the lowest level since April 2020.” (Joel Kan)
- Mortgage applications drop by 7.85% year over year (Mortgage News Daily)
- The Fed will continue to increase interest rates until the country is in a recession (Conference Board)
- Existing-home sales declined for the fifth straight month to a seasonally adjusted annual rate of 5.12 million. Sales were down 5.4% from May and 14.2% from one year ago. (National Association of Realtors).
- The median existing-home sales price climbed 13.4% from one year ago to $416,000, a new record high. ( NAR)
- The inventory of unsold existing homes rose to 1.26 million by the end of June, or the equivalent of 3.0 months at the current monthly sales pace. (NAR)
- “Inflation will have a strong influence on where mortgage rates go in the months ahead. Whenever inflation finally starts to ease, so will mortgage rates — but even then, home prices are still subject to demand and very tight supply.” (Greg McBride, Chief Financial Analyst at Bankrate)
What do the headlines mean for buyers?
While the Federal Reserve is working hard to bring down inflation, the latest data shows the inflation rate is still going up. Uncertainty exist on how long it will take to bring down inflation and mortgage rates trajectory, both are important for your homeownership plans. Why you should continue to consider a home purchase.
• The surge in single family home pricing has to do with demand and if the market is reducing the new construction of single-family homes, which may continue to place pressure on the current home price growth rate.
• Homeownership Is Historically a Great Hedge Against Inflation – “Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.” – Mark Cussen, Financial Writer at Investopedia
• Existing single family home inventory continues to increase, thus giving you more negotiating power in some markets.
Most buyers are waiting for prices to drop. If it drops, will the interest rate increases erode those savings? Something to consider.
What do these headlines mean for sellers?
As the housing market is looking for the new normal, sellers are having to make adjustments. The interest rates and overall economic conditions are forcing buyers to evaluate what they can and cannot do. Sellers will have to adjust to not being the driver.
Primary homes –
The location and pricing your home is key. Pricing the home above the current market and needing repairs will be a hard sell.
Secondary homes are a want to have and not a must have. Typically there are 3 types of buyers 1) buyers that are hedging on inflation and the market; 2) investors looking for price appreciation over time; and 3)vacation home owners that will be using the home and plan to utilize rental income to cover part of the ownership cost. Pricing the home and appearance is now more important, in my local market with the number of reported active listings increasing by 34% and the number of monthly sales going down since May 2022 . Review the comps your real estate agent provides. Look at comparable home movements in the last 60 days, and together develop a pricing strategy.
Sellers and buyers both have difficult decisions and challenging negotiations. The real estate market is based on what buyers are willing to pay and sellers are willing to receive. Sellers are still reaching for the stars and buyers are reaching for the trenches.
Now is when your local, experienced, real estate professionals can provide you data so you can make informed decisions.