There is always a lot of optimism when spring rolls around. Winter is cold, dark, and dreary, and this year it was historically wet. Sellers are often reluctant to put their homes on the market before March, leading to a lack of inventory. Buyers are still out there looking for ‘the one’, but this year has been especially slow with both demand and inventory through the winter. I can’t recall a slower winter in my 19-year career of selling real estate.
The lack of demand made price reductions commonplace, even if there were only a few homes on the market. It was difficult selling houses when it was raining practically every weekend. I’m not complaining, we needed the rain, but I’m pretty sure it effected buyers negatively. It didn’t help that the interest rates at one point hit 7%. Most recently they’ve spent time hovering around 6-6.25% with the expectation of further declines. This comes just in time for the spring inventory!
I get the feeling that things are going to pick up for the next few months. If inventory remains low and buyers become accustomed to the elevated interest rates, sellers should have a good spring. The unspoken issue is what interest rates have done to buyers. Specifically, I have one buyer who has taken a huge hit from the interest rate increases. The buyer can afford $150,000 less in a mortgage than the last time she checked in with her mortgage broker! Good thing she didn’t check with the rates were at 7%.
The Federal Reserve has once again recently increased their overnight lending rate, although this time only by .25 and there is talk of pausing the increases. They better, or they risk putting more banks out of business! We are certainly living in an amazing, and uncertain time. Recession remains a real risk to the economy, but high inflation is undermining everyone’s buying power and is likely to be with us through 2023. Inflation is also what’s keeping the mortgage rates high, and until that comes down, house hunters can’t expect much mortgage relief.
Unless a buyer has all cash, they are going to feel these interest rate increases and their expectations will need to adjust. Possibly sellers’ expectations will also need to adjust. I recently spoke with one agent who said her buyers who were hunting for houses up to $3 million last year are now only looking up to $2 million, and they are not happy. The buyers the Realtor was referring to were probably not only effected by the higher interest rates, but the hit the stock market took last year. She may have been slightly exaggerating as well.
If you are selling this spring, you should expect good things. If you are buying, you may be in for a rough ride.