Real Estate Market This Spring
With the spring housing market starting to kick off, let us go over what to expect from the real estate market this spring. Whether you are buying or selling your home, it is important to know what to expect coming into the season. While there is still extreme uncertainty around the real estate market, the housing market seems to ignore it. In the spring, we need to watch out for the overseas conflict, rising inflation, and rate hikes from the Federal Reserve. Here is what a spring market looks like and what to expect from the real estate market this spring.
Mortgage Rates Increasing
Freddie Mac states that the 30-year fixed mortgage rate is up by over one full point in the past six months. In fact, even in the last 3 months, mortgage rates might be up close to one percent. Despite some volatility in the rates market because of geopolitical and national events, rates are still going higher in the following months. Freddie Mac states:
“The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year.”
For first-time home buyers and sellers, if you are looking for a home, waiting will cost you thousands of dollars. A higher mortgage rate cuts into your buying power, and increases your monthly mortgage payment. With higher payments, you can expect to pay up to a third more of the home price over thirty years.
Inventory Will Increase… Hopefully
In the realm of inventory, buyers are hopefully going to see some relief. According to realtor.com, each of the past two months this year saw an increase in newly listed homes. Also, the National Association of Realtors (NAR) announced, on average, a month increase in inventory for the first time in over eight months. Inventory of existing homes typically increases the most in the spring, primarily April-June. Based on recent activity, we can expect to find more inventory on the market over the next 90 days, bringing relief to buyers.
For those looking to buy a home, it is important to be ready to act and not hesitate. Getting a pre-approval letter, or even getting fully pre-qualified will be beneficial. As you can expect, the housing market is still hot, so homes do not last long. For sellers, listing now still gives you the best opportunity to have the most eyes possible on your home. As inventory increases, you are less likely to have as much interest in your home because there will be more homes available. There is a chance that mortgage rates have altered demand, and your home could sit longer than expected.
Home Prices Increase In The Real Estate Market This Spring
Prices are set on the principle of supply and demand. Currently, we have seen more demand that we can supply, leading to increases in housing, whether buying or renting. Even with the number of homes increasing on the market, it is important to note that buyer demand is still strong and people have locked in lower rates. According to realtor.com, their most recent Housing Report states:
“During the final two weeks of the month, more new sellers entered the market than during the same time last year. . . . However, with 5.8 million new homes missing from the market and millions of millennials at first-time buying ages, housing supply faces a long road to catching up with demand.”
Now you may be wondering how to interpret this information. Well, the demand for housing is still dramatically outpacing supply of homes. This leads to an increase in home prices, as an equilibrium is trying to be found. Home prices will appreciate until there is a balance in supply and demand. Experts are predicting that the level of price appreciation will decelerate from the highs we saw last year. Prices will continue to climb, but not at high double-digit rates.
Increasing Mortgage Rates And Prices
People tend to think that any increase in mortgage rates instantly slows demand. However, that is not the case. A 1% increase in mortgage rates may seem like a low, but rates are still below the historical and 10-year averages. According to Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae,
“What I will caution against is making the inference that interest rates have a direct impact on house prices. That is not true.”
Freddie Mac did a study on how increasing mortgage rates impact demand. A 1% increase is what they started their research with, and they looked for the impact on the price of homes. Here is the information they found.