Last year the real estate market was unlike any other. It was a sizzling hot seller's market, as sellers took advantage of the low housing inventory available for sale. Buyers were taking advantage of the historically low interest rates, borrowing money cheaply. This spring, the real estate market has experienced some changes that will affect the summer real estate market.
What's Making the Real Estate Market Experience Change?
First and garnering most of the headlines are the rising interest rates. According to an April 22, 2022 article on forbes.com, "The average rate rose on a 30-year fixed mortgage, inching up to 5.35% from 5.34% yesterday. The 52-week low is 3.00%." Also having an impacgt on the market is inflation. According to an article written by Trevor Hughes for USA Today, "Federal officials earlier this month said inflation hit a 40-year high and the consumer price index jumped to 8.5% annually, the fastest pace since December 1981." The situation in the Ukraine is causing unrest and uncertainty in some home buyers and sellers as well.
Summer Market Expectations for Sellers
An article on keepingcurrentmatters.com, This Spring Presents Sellers with a Golden Opportunity, cites four reasons why the spring market is still strong for sellers. The number of homes on the market is still low and sellers are still getting multiple, strong offers on their homes. The article states, "According to the most recent Homeowner Equity Insight from CoreLogic, homeowners are sitting on record amounts of equity thanks to recent home price appreciation. The report finds that the average homeowner has gained $55,300 in equity over the past year." Home prices are still rising. Finally, even though interest rates are rising, they are still well below what they've been in recent decades. It's the perspective that really counts. The predictions are that these reasons will filter right on into the summer real estate market.
Summer Expectations for Buyers
The real estate market is already seeing some buyers bow out of the market to purchase homes. Some first-time home buyers are not able to be approved to purchase homes at the current interest rates. Some investors are taking a break from purchasing homes and adding to their investment inventory because mortgage money is not as cheap to borrow with the rising interest rates. There are homebuyers that are being affected by inflation, resulting in the fear of being able to afford a new home if food, gas and other prices continue to go up. Finally, the Covid-19 pandemic is still putting some homebuyers plans on hold, as it has for the past two years. There are still plenty of buyers in the market to purchase homes, however. In an article on time.com, "Home values skyrocketed by nearly 20% in 2021, according to the most recent data by the S & P Case-Schiller national index of home prices. While housing prices aren't expected to drop this year, the increasing rate of prices should slow down.
Many experts believe home values will increase at roughly half the rate (single-digit increases) we saw during the peak of 2021." We are already seeing a slow-down in price increases this spring and are predicting this to continue in the summer real estate market. It should be more like a regular summer market.
All in all, the summer real estate market will experience changes, but not drastic changes. The market will not experience a real estate bubble burst as some people fear.