The Inventory of homes for sale is finally rising from 30 days or less supply to over 3 months. The frenzied pace of 2020 and 2021 is finally calming down. There were more homes for sale last week than the same week in 2019. Keep in mind the 2019 was a strong seller’s market.
“According to NAR statistics, the median real-estate experience of all Realtors is eight years.
The last time we saw a balanced market in Phoenix was in 2014. If the national numbers hold true in our market, half of all current agents will have never participated in a balanced market.” Let alone a Buyer’s Market!
Three Types Of Real Estate Markets:
Seller’s Market – More Buyers Than Sellers. Time to sell a home is shorter and competition to purchase may result in multiple offers. There are different degrees of Seller’s Markets as we saw a feeding frenzy in 2020-2021 unlike any prior market. Home prices rose dramatically.
Balanced Market – Relative Balance between Buyers and Sellers. Time to sell a home will increase and sellers will need to price their home competitively and expect to negotiate with the buyers. Home Price growth will slow up. Multiple offers will be less frequent and sellers may be negotiating one offer at a time.
*Indications are that we may be moving into a Balanced Market. Some sellers are reducing their asking prices to more realistic and competitive list prices. Also, seeing sellers starting to offer to assist with buyer’s closing costs. Buyer demand has been falling.
Buyer’s Market – More Sellers than Buyers. Buyers will have a surplus of homes from which to choose. Sellers will need to be much more flexible in their negotiations. It may take weeks just to see showings and months to see an offer.
During my real estate career I have seen extreme seller’s markets with listings receiving multiple offers the same day the home is listed to extreme buyer’s markets where the average market time to sell a home was over 18 months.
Mortgage Interest Rates have been historically low for years giving buyers much more buying power. This year interest rates have been rising 2-3% from averages around 3%. The last year we saw average interest rates of 5% was 2009 and over 6% in 2008.
Home Buyers have been hit by both dramatic increases in home prices, but also rising interest rates. For every 1% increase in interest rates the buyer loses approximately 10% of their of their buying power. As a result some first time buyers are being priced out of the real estate market. Other buyers are needing to revise their expectations for their first home.
The only way to lock in your housing costs is to own your home. If you obtain a 30 year fixed rate mortgage your monthly cost doesn’t change. ( taxes, home owners insurance and HOA fees, if any can change) Rents go up. Over time your mortgage balance gets paid down. Home appreciation the the valley has averaged 4% per year for the last 40 years. Your home’s value is doubling roughly every 20 years.
30 year Fixed Rate Mortgage
$300,000 3% = $1264.81 5% = $1610.46 6% = $1798.65
$1264.81 Payment at 5% = $235,610 Mortgage
$1264.81 Payment at 6% = $210,960 Mortgage
If mortgage rates drop 1% or more in the future and you are going to be in your home another 2-4 years, so you break even on the cost of refinancing – then refinance to the lower rate.
Unless you are paying cash the change in mortgage interest rates has a much more dramatic effect on your buying power than the price of the home. Owning a home is not a short term investment! Average home owner owns their home for 7 to 10-12 years. Why worry about year to year appreciation changes unless your are about to sell your home.
Inflation Rose 9.1% In June – Higher than expected
Federal Reserve Raised the Fed Funds Rate .75% in June which is the highest increase since 1994. Initial Estimates for July’s Increase is another .75 with some speculating that the increase could be as much as 1%. The Fed’s goal inflation rate is 2%. With the ongoing inflation increases they are being more aggressive in the fight against inflation.
You have to go back to the early 1980s to see inflation this high and higher.
30 Year Fixed Rate Mortgage interest rates peaked in 1981 at over than 18%. Mortgage rates were rising from the 1970s and after topping out in 1981 started falling.
Our mortgage interest rates have basically been low by historical standards for the last twenty years – Running as high as 7% or so to lows under 3%.
To See the History of 30 year fixed Mortgage Interest Rates since 1971 to 2022
All of us are being forced to revise our budgets based on increases in food, gas, shelter and more. Ideally, you should have 3-6 months of monthly expenses in an emergency fund. The dollar amount needs to increase as the costs of even basic necessities have risen.
If you are considering buying a home make sure your credit is in the best shape possible. Have money saved for down payment and closing expenses, plus reserves. If you already own a home that you will be selling in order to buy your next home talk to a professional real estate agent on what you can expect to net when you sell and also work with a local mortgage lender to see how much home you can afford to purchase.
How do you want to proceed? Sell your home first? Buy your next home first? There are a number of tools to help accomplish your goals. A Real Estate Professional can answer your questions and help you develop a strategy that works with your situation.
Arm yourself with knowledge, a game plan and goals in advance of taking an action. An experienced real estate agent and local mortgage loan officer can help with this process. Develop good relationships with your professional team. You may wanting to make a move soon or perhaps 6-12 months or more from now. Good planning will help this process go more smoothly for you.