Uncertainty Can Lead to Opportunity
(If You Know Where to Look)
The most recent Fed meeting has created more volatility in the real estate market as mortgage rates ended slightly higher this week. What else is new? It seems that uncertainty has become the new normal. The Fed has been rapidly raising the funds rate by 500 basis points over ten prior meetings and, as expected, they paused rate hikes this week, possibly leaving room for a 25 basis point increase at a future meeting. Not the kind of stuff that instills confidence with buyers or sellers. But as the more savvy real estate investors know, an uncertain market can lead to some great finds—if you are patient and know where to look. But first, let’s consider the playing field.
Consider Some Numbers
- 451,000 unsold single-family homes on the U.S. market this week; 1.8% increase from the previous week
- Median price for single-family homes lingers at a yearly peak of $455,000; 1% lower than same time last year
- The total rate of new sales has been dropping, with only 65,000 new pendings this week; a rate 21% lower than last year at this time
Even more telling, over the previous four weeks, in which mortgage rates increased to 7%, the percentage of new listings going into contract immediately has steadily decreased, indicating a decline in immediate demand. Not surprisingly, buyers are wary, and sellers are nervous, the latter leading to price cuts. The number of homes on the market taking a price cut has rapidly increased, with 31.4% of homes seeing a price reduction.
No Time to Take Your Eye Off the Ball
Now is the time to stay engaged. In spite of the anxiety, nothing catastrophic has happened. We’re simply adjusting to a period of higher rates and volatility. There are still opportunities for buyers, especially as many sellers are considering significant price cuts. As for sellers, hold pat if possible, and ride out this wave. Above all, this is a time for both buyers and sellers to stay in daily contact with their Realtor and lender. When a window of opportunity opens (however briefly) you want to be able to act—and act fast. There is no substitute for staying informed.
IN PLAIN BLACK & WHITE
What Buyers Need to Know
- The 7% mortgage rates may make purchasing a home more costly and could affect the affordability of homes.
- There’s a slight slowdown in the sales rate, which may indicate a less competitive buying environment.
- Fewer homes are going into contract immediately after being listed, suggesting that buyers might have more time to consider their options before making an offer.
- Price cuts are gradually increasing, so there may be opportunities to negotiate lower prices.
What Sellers Need to Know
- The number of homes on the market is slowly increasing, indicating the potential for more competition among sellers.
- High mortgage rates may decrease the pool of buyers, potentially lengthening the time a home stays on the market.
- There’s been an increase in the number of homes taking a price cut, indicating that sellers might need to adjust their pricing expectations.
- Sellers may face fewer immediate offers on their listings due to higher mortgage rates impacting buyers’ eagerness.
What Investors Need to Know
- Persistent high mortgage rates could signal a future slowdown in the housing market, impacting property values.
- The slowing sales rate and increasing inventory might present opportunities for discounted purchases.
- The median price for single-family homes remains relatively high, signaling sustained value in this segment of the market.
- However, investors need to monitor price cuts, as they may indicate a future downward trend in property prices.