Today's Market 9/1/22

Bigger picture.

Average mortgage rates currently are sitting around - 6%, which when we look back is pretty average and still on the lower end. The long-term average for mortgage rates is just under - 8%.

There has been a decrease of showings per listing, which to me shows there are less buyers in the market.

Why I think people are so scared of mortgage rates right now is seeing the drastic jump in rates. Putting it into perspective, going up 2 points is a 20% decrease in buying power. For example, buyers that were looking at $500,000 houses now lose $100,000 in buying power for a mortgage at the at the same payment.

Clients who were looking at a $500,000 house for a while, losing out on offers and now are having to look at $400,000 are sad that they are now having to compromise on amenities and are seeing the difference of what a $100,000 can mean in home buying.

New buyers are coming in and excited about this $400,000, because they were never looking at the $500,000 houses. Buyers that have been in the market through the last 6 months are discouraged with having to look at houses in the lower price range and having to give up some things. New buyers don't have the discouragement of the last 6 months to a year and changes in mortgage rates.

In reality, the mortage rates are still below average historically. In my opinion it is still a good time to buy while rates are "lower".

This summer has also been one of busy or- "being off the leash" as said by Ninja Selling. I myself noticed a decrease of free weekend this year, filled with events that were re-scheduled and back in person. I made an Instagram poll asking others if their summer was busier than usual, and 90% said their summer was also packed.

This is the first summer in a couple years people have summer back again where they can take vacations and go fly somewhere to see family. After people not being able to travel during the Pandemic, they feel free again. Enjoying freedom and caring less. People are back out doing things, which means spending money saved on travel and activities vs. a new home. We are in the months where people realize summer is ending and they are wanting to eat up all their last lake or camping days/weekends. Consumer pricing is also up 9.1% over just the last year, which also makes it harder for people to save money towards their goals.

Bigger picture. Looking back, you can see in the market exactly when Covid hit. The housing inventory went down drastically, people were not wanting to move or leave their houses in general. Over the next couple years it has fluctuated going back up a little at times and down again during the cold months.

Inventory is still historically low, meaning buyers are still outnumbering sellers.

We all know what happened next, the interest rates dropped to a record low. There was an influx of buyers in the market with the low interest rates, and little sellers with COVID still strong. Driving prices and changing the market. The market became sellers listing on the high end and knowing that there would still be one or more people putting an offer in.

However, the number of price reductions have recently been higher. In my opinion, sellers and agents are still seeing the market move quick and are still trying to take advantage. However, buyers are not biting anymore and there are less of them due to busyness and mortgage rates (as you can see in the median showings to under contract above). Yes, houses are still going with multiple offers. BUT they are the houses that are priced correctly and aren't being greedy scaring away buyers.

I will say it is okay to have some days on market, talking with other agents and seeing what they are experiencing in neighborhoods is huge. Bigger picture, houses going in 48 hours with multiple offers isn't normal. I got my license the month before COVID hit, and I was always told by seasoned agents "you haven't seen what a normal market looks like".

We have seen price inflation go crazy over the last couple years, but bigger picture it has continuously grown over the last 8 years. New construction fluctuating more than previously owned homes, and new construction being higher currently.

Average inflation rate rose 8.5% in July, and was 9.1% in June, which shows appreciation to be slowing a bit. Not necessarily decreasing but slowing. Below you can see a decrease in list prices. Naturally when mortgage rates go up, typically house prices go down.

https://www.teralorrai.com/my-home-value/ Sellers if you're curious what your home is currently worth, I can run a FREE CMA for you, or you can get a quick price report on my website above!

The cost of rent overall was up 0.8%, which is the biggest increase since April 1986. Throughout the U.S. asking rent grew 13.5%, more than double any previous year. 2022 is forecasted to rise. Nationwide rent prices in July were up month-over-month. One-bedrooms saw the greatest increase at 4.1 percent or nearly $70. Two-bedrooms weren't far behind increasing by nearly $60, or 2.8 percent.

Rent prices have increased significantly year-over-year. One- and two-bedroom rents were up 24.4% and 21.8%, respectively.

Below is a graph comparing renting and buying, and the equity you'd gain over 10 years investing in a home.

"You can't see the picture when you're in the frame"

Bigger Picture

In my opinion, it is still a good time to sell and buy. Interest rates are on the rise yes, but historically still below average for buyers. There also the option of re-financing in the future if rates drop again. I think with everything happening so fast, we have lost perspective of time. Sellers are still in the hot seat still with record low inventory continuing. Take a step back and remember your end goal! Talking to a real estate agent about your end goal is so important, they can help you lay out all your options.

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