Home Prices are Falling from All-Time Highs
Home prices continue to fall from all-time highs but rising interest rates have made it difficult for some buyers to purchase, in particular, first-time homebuyers, who have felt the squeeze when looking for properties in this market.
Other buyers have simply stopped looking and are hoping for a crash, but it is likely that the market is headed for a correction instead, here’s why.
Housing inventory remains low.
A housing crash occurs when numerous homes flood the market at the same time. With all those homes competing for buyers, drastic price reductions occur. That is not happening in this market. The updated, renovated homes in great locations continue to sell quickly. The homes that do tend to stay on the market longer are those that aren’t “move-in ready” and haven’t adjusted their list prices to today’s market.
Home values remain high.
Home prices have skyrocketed over the past year and even though we are currently experiencing a market where prices have gone down 5-10%, they are still high in comparison to prices 3 years ago.
Lending standards are higher
In 2008, subprime mortgages caused a housing crash with subprime lenders willing to give just about anybody money, but today the real estate lending market is much more stringent. New laws have reduced risks for buyers concerned about affordability.
If you are considering purchasing a home in this market, here are the positives…
Home showings are down, giving buyers more power
There was a time when as soon as I put a listing on the market, I would have 3 offers within a few hours. Since there are fewer buyers in the market, there are also fewer showings for homes on sale, which gives buyers a better chance to buy a home without the stress of having to outbid 20 other offers.
Average home prices are falling, which can balance out rate hikes
Interest rates are the highest they have been in a long time, which is bad news for buyers and sellers. The good news for buyers is that as the mortgage rate goes up, home prices fall. This is because higher interest rates deter buyers from entering the market giving qualified buyers more options, and less competition.
Mortgage rate buydowns are available
Sellers and Builders have recently started offering mortgage rate buydowns as incentives to purchase their homes.
Buyers have increasingly been able to negotiate a 2-1 buydown or the 3-2-1 buydown, which means that the seller or builder offers to pay money upfront to buy down your interest rate. So instead of starting at a 7% interest rate, the seller could buy down your rate to 4% at the start of your payment period, then after a year, the rate will go up to 5%, then another year, it will go up to 6%, then finally ending at 7% depending on which buydown program you ended up using.
The intention in using this program is that the hope is interest rates have gone down in a couple of years enough to refinance at a stable rate in 2 or three years’ time.
Many economists are predicting that by late Summer 2023 we are likely to see mortgage rates hovering right around 5%.
So, if you are thinking of getting into the market and buying a home you can do it now, while prices are lower and you can negotiate more concessions from the seller. In a couple of years, when rates have reduced, you can then refinance and settle into a lower, more manageable interest rate.
Park Circle Market Stats - October 2022
Average Sales Price
October 2022: ($445,900) – down 14.8% from July 2022: ($523,259)
Average Price Per Sq Ft
Homes for Sale
July 2022: (13)
Average Days on Market
October 2022: (9 days)
July 2022: (6 days)
October 2022: (1.1 Months) from July 2022: (0.6 Months)