Over the past month, the real estate market has made dramatic shifts with regard to public perception and overall affordability. What a purchaser could afford as a monthly payment 6 months ago with the same down payment has now drastically decreased due to increased interest rates because of inflation. We’re seeing two main reactions to these changes:
- Buyers are waiting for interest rates to go down and are not prioritizing their home search
- Buyers are leaning into the fact that there is less competition, and they are taking advantage of a more balanced market with more inventory and options available to get under contract
Now, just because inventory is increasing doesn’t mean that prices are decreasing. We need to remember that ever since COVID first swept through our country in 2020, we have seen record-low numbers of homes available paired with record-low interest rates. That resulted in extreme price appreciation and purchasing competition, levels that were not sustainable for a long period of time.
With more inventory options available this summer, buyers are finally able to be a little more selective with their home search. These buyers who are leaning into the current market conditions understand that even though purchasing power is less today than it was 6 months ago, prices are not expected to decrease (they are forecasted to have single-digit year-over-year appreciation instead of double-digit as we saw in the past few years). Waiting for interest rates to go back to 3, 4, or 5% means also waiting to jump back into the market when so many other buyers are planning to jump in, too.
It's an ideal time to consider the phrase “marry the house, date the rate”. An average homeowner stays in their home 7-10 years, and yet they keep their mortgage terms for far shorter, on average, 3-5 years. The market is finally presenting opportunities for buyers to get under contract on a home without having to waive contingencies and offer irrational amounts above the asking price, and with inventory increasing in the summer months and buyers not having to “settle”, we are seeing many purchasers finding that what they get for their money in the current market now has a few more items on their ”must-have” list, and real estate continues to be a great long-term investment.
