November Market Report

We're finding today's market is perhaps the most misunderstood in recent memory, so let's clear up a few of these common misconceptions we're consistently hearing.

Myth: Home Prices Are Falling
Reality: Home Prices Fell but Are on The Rise Again

Home prices did fall about 15% from their peak in May 2022 to February 2023 after mortgage interest rates climbed from 3% to more than 7% last summer in response to the Feds efforts to curtail inflation. However, home prices are back on the rise gaining more than 8% since February this year and continuing to show gains despite interest rates being higher than 7.25% throughout much of the late summer.

This is happening for a few reasons...

Acclimation to Rates... after more than 15 years of historically low rates, it’s understandable for rates in the 6-7% range to feel high. However, historically they are not. In fact, the average mortgage rate over the past 50 years is 7.74%. With the Fed and other economists signaling rates will by "higher for longer" most buyers are creating demand by getting back in the market after recognizing rates in the 6-7% ranges are likely the "new normal", and it’s unlikely we'll see rates under 5% anytime in the foreseeable future.

Sellers Still Hesitant... inventory is being kept low as Sellers with properties with low mortgage rates are more reserved about making a move and putting their home on the market. While the volume of buyers is lower due to affordability issues caused by higher rates, the volume of sellers is also lower, which leaves the market with the same inventory balance we've seen for the past 5 years.

Builders Cautious... after a catastrophic time during the 2008 recession, builders (and their lenders) are also more reserved and slowing the pace of building to match the underlying lower volume of potential buyers which is keeping inventory low.

Myth: Now Is a Bad Time to Buy
Reality: For Some It Is the Best Time to Act

The rapid rise and normalization of interest rates are causing some to say, "it's a bad time to buy". When we drill down on the specifics, we find much of this is about "gut" feelings related to market timing rather than data driven economic strategy.

Here are a few reasons it is a great time for action for many:

Less Competitive... despite inventory continuing to stay low, many listings which would have received 5-10 competitive offers three years ago are receiving just 1 or 2 offers today. Buyers still need to be qualified and prepared, however they don't need to bring an all-cash offer, waived inspection contingencies, large appraisal guarantees, big rent backs or promises of indentured servitude of their next born to win a property. 

So, if you're a buyer without a huge down payment, using FHA/VA/USDA or WSHFC financing, or other attributes which made you less competitive before, today is a great opportunity.

Very Likely Getting More Affordable... if you can afford the home you want at today's higher mortgage rates, the financial picture is very likely to only get better for you as rates decline to what the Fed has expressed as their desired new long term normal for mortgage rates which will be the 5-6% range. As rates drop 0.5%, you'll save about 5% on your monthly payment, and in most cases with standard refinance costs you'll breakeven in less than 18 months making every month thereafter profitable.

Still Great for Sellers... while the market isn't as competitive, it is still brisk and well prepared, well-priced homes are selling quickly in today's market enabling sellers to make their move up, downsize or move across town possible.

In the end, we believe it's always the right time to buy the right property at the right price... and all markets have opportunities for different buyers and sellers. If you have questions, give us a call!