Home sales rebound after a period of low inventory and sales.
Last year’s housing market has been described by some as uneventful…to say the least. The cause of this “uneventful” market has been low inventory accompanied by high-interest rates. This created a market that did not see as much action as it had in previous years. The lull of the current market is a direct result of the feds raising interest rates, low inventory, and higher home prices. Some economists say that we have reached the bottom of a slow market, with things set to rally in the coming months. Now that we are approaching the fall of 2023 some things are looking up!
Brad Dillman, a chief economist states, “It appears to me that after about a year of some slowdown in general — in housing activity and disinflation and home prices — that we’re now seeing a floor and then a potential rally.”
The feds have increased rates as a way of doing a housing market correction. Experts see this coming to an end as they are predicting one more rise in interest-rates followed by an end to interest rate hikes for this cycle, aka this year. Rates are expected to remain around 6% without any increases. This could bring buyers and sellers back into the market, creating more supply and demand. Some experts believe this pause in interest rate hikes could cause housing prices to come down and increase housing inventory.
So what is the current status of the housing market’s health…
According to Investor’s Place, there are two clear indicators of the housing market’s health: (1) The number of homes being built each month and (2) building permits. There has been an increase in both building permits and the number of homes being built since May. Permits rose 5.2% and new builds went up 20%. This is pointing to a healthy real estate market and the rally that we were hoping to see. We will see an increase in newly built home purchases as supply remains lower over the next few months. With home prices and interest rates still higher than average, new builds are drawing buyers in with builder incentives and pricing.
Nar’s Yun from Investopedia says that as supply boosts and mortgage rates and home prices fall, sales are expected to rise through the end of the year. According to Yun, we are approaching the bottom of home sales, that lull we mentioned before, with gradual improvement projected for sales in the second half of the year. The market is still unpredictable but experts are hopeful, as are we!
So what does this mean for sellers?
The good news for sellers is that people are still buying and with a lack of inventory you can remain hopeful that your home will sell for a competitive price. Baby boomers are currently ruling the housing market in terms of home purchases, states NBC News. The affordability of houses paired with interest-rates has made home purchases for first-time home buyers a bit difficult. Some baby boomers are operating off of all cash purchases, avoiding high-interest rates altogether. Having owned multiple homes in a lifetime is what is allowing these types of cash purchases. This is great news if you are in the market to sell. Check out the inventory in your local market if you are considering a sale and determine if now is the right time for you.
What about buyers?
Anytime you wait for interest rates to stop increasing you run the risk of getting a mortgage at a higher rate. Rate increases aren’t guaranteed nor are rate decreases. Overall, buying a house means that you are starting to build equity, which is never a bad thing. When considering buying in this current market ask yourselves a few questions…
1. Have I saved enough? In any market, being prepared to put down a sizable down payment is important.
2. What is the current climate of the market that I plan to buy in?
3. How long do I plan on staying in the house that I am purchasing?
4. What is my timeline and am I willing to wait for the right home to come on the market?
5. How is my credit? The better your credit, the lower your interest rate will be.
We would like to reiterate that housing markets are not always predictable. Across the country, the market looks different in each area. Deciding to sell or not to sell, to buy or not buy based on one national headline is not the move we recommend. Do your research, find your trusted realtor for your local market, and make your decisions from there! We hope this year turns out to be a successful one for all buyers and sellers and we wish you the best of luck!