With the spring housing market underway, many of you are probably curious about what you can expect when it comes to buying or selling a house. While there are multiple factors causing some uncertainty, the housing market seems to be relatively immune from the impacts of the war in Ukraine, rising inflation, and the first rate increase from the Federal Reserve in over three years.
Here’s a look at what the real experts say you can expect this spring.
1. Mortgage Rates Will Climb
Freddie Mac reports the 30-year fixed mortgage rate has increased by more than a full point in the past six months. And despite some mild fluctuation in recent weeks, experts believe rates will continue to edge up over the next 90 days. As Freddie Mac says: “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of they year.”
If you’re a first-time buyer or a seller thinking of moving to a home that better fits your needs, realize that waiting will likely mean you’ll pay a higher mortgage rate on your purchase. And that higher rate drives up your monthly payment and can really add up over the life of your loan.
2. Housing Inventory Will Increase
There may be some relief coming for buyers searching for a home to purchase.
Realtor.com recently reported that the number of newly listed homes has grown for each of the last two months. Also, the National Association of Realtors (NAR) just announced the months’ supply of inventory increased for the first time in eight months. The inventory of existing homes usually grows every spring, and it seems, based on recent activity, the next 90 days could bring more listings to the market.
On Cape Cod, there were a little over 200 new listings in January. In February that number was over 400. While that’s not close to normal inventory, it is trending in the right direction.
Anecdotally, our colleagues at our Today Real Estate company wide meetings seem to be talking more about new listings than they have in a while.
If you’re a buyer and have been frustrated with the limited supply of homes available for sale, it looks like you could find some relief this spring. However, be prepared to act quickly if you find the right one.
If you’re a seller, listing now instead of waiting for additional competition to hit the market makes sense. Your leverage in any negotiation during the sale will be impacted as additional homes come to market.
3. Home Prices Will Rise
Prices are always determined by supply and demand. Though the number of homes entering the market is increasing, buyer demand remains very strong.
As realtor.com explains in their most recent Housing Report: “During the final two weeks of the month, more new sellers entered the market than during the same time last year…However, with millions of millennials at first-time buying ages, housing supply faces a long road catching up with demand.”
What does that mean for you? With the demand for housing still outpacing supply, home prices will continue to appreciate. Many experts believe the level of appreciation will decelerate from the high double-digit levels we’ve seen over the last two years. That means prices will continue to climb, just at a more moderate pace. Most experts are predicting home prices will not depreciate.
Won’t Increasing Mortgage Rates Cause Home Prices To Fall?
While some people may believe a 1% increase in mortgage rates will impact demand so dramatically that home prices will have to fall, experts say otherwise. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, says: “What I will caution against is making the inference that interest rates have a direct impacting on house prices. That is not true.”
Freddie Mac studied the impact that mortgage rates increasing by at least 1% had on home prices in the past. Here are the results of that study:
As the chart shows, mortgage rates jumped by at least 1% six times in the last 30 years. In each case, home values increased.
So again, if you’re a first-time buyer or a repeat buyer, waiting to likely means you’ll pay more for a home later in the year (as compared to its current value).
Three things seem certain going into the spring housing market:
- Mortgage rates will continue to rise.
- The selection of homes available for sale will modestly improve.
- Prices will continue to appreciate, just at a slightly slower pace.
Curious about your options? We’re happy to answer your questions. Let’s connect at 508-360-5664 or firstname.lastname@example.org.
It’s important that you have the right information to make an educated and informed decision.
Enjoy your week…
Mari and Hank