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Volatility is the Name of the Game

This Market is for the Birds

Make that hummingbirds. If you’ve ever watched a hummingbird at a nectar feeder port, you realize they never stay in one spot for long. They remain in the general vicinity, mind you, but they zip up, zip down, dart left, dart right—they buzz about in constant motion. It’s actually analogous to the vacillating state of interest rates in the first couple of months of 2023. Just when you think they’re trending down, they pop back up, and often within the span of a couple of days. And just as soon as they lurch and lunge toward 7%, they quickly ease back down to the low 6s. It’s a Ripley’s. The truth is that no one knows precisely what they’ll do. Like the hummingbird, it’s impossible to guess where exactly they will alight from week to week, even day to day. The good news is the worst seems to be over, topping out around 7%. Most experts agree (myself included) that rates should be in the general ballpark of 6% to 7%. Of course, that wavering 1% can mean the difference in securing a home that is affordable or not.


“The interest on a 30-year fixed mortgage ‘today’ is approaching 7% again. Just a few weeks ago, we’d dropped just under 6%. An almost 100 basis point move in rates has a significant impact on payments and affordability.”

~ Mike Simonsen, President, Altos Research


Is Volatility the New Normal?

Well, yes and no. In one sense, the rates are impossible to predict with any certainty. However, we seem to be residing snuggly between 6 and 7%. As of this writing, I don’t foresee a huge jerk of the wheel in either direction. With spring upon us, everyone is in a wait-and-see mode, especially buyers, who are being more cautious than ever. This trend will hold true if the market is 6.5% or higher. If things shift to 6% or lower, look for buyers to come out of the woodwork and strike fast. The key is for sellers and buyers to keep a constant eye on the market. The bigger variable—even more than rates (which should normalize at some point)—is the limited amount of inventory on the market. As of now, spring inventory is below previous years, both before and after COVID (see below).


New Listings Now Below Previous Years
New Monthly Listing Counts (in Thousands)


Buyer Dilemma? Or Buyer Opportunity?

It’s all a matter of perspective. Some buyers will pounce when the rate is 6.5% or lower, assuming they can find what they want. Others may want to wait till the rates drop to 6%, or even into the 5s. Each buyer is different and has relative urgency depending upon home needs, station in life, and other factors that influence decision-making. What I tell my clients is that even with the rates shifting around between 6 to 7%, there will always be opportunities if you are patient and if you identify a neighborhood or home that you view as a long-term solution. Even if you buy at a higher initial rate, you can always refinance later when the rates are more favorable. That way, you can pull the trigger on a home you really love, knowing that you’re going to be there a while and can afford to “wait it out” and take advantage of lower rates in the future.

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