As one can imagine the sharp increase in mortgage interest rates is having an effect on the housing market. For the average buyers who have between 5-20% to invest as a down payment, their monthly obligation has probably increased by about 20%. Yes- that’s a lot. Hence the decline in mortgage loan applications.
So far, however, the change has only resulted in a deceleration in the number of buyers but not in the price of housing. For the past couple of years, buyer demand has outstripped inventory causing virtually every sale to garner between three to twenty offers. This is not hyperbole. The steady jump in the cost of housing is verification of a sellers’ market.
A few months ago, a fresh listing would still attract a strong first buyer, one who perhaps even wrote an offer above the list price in an effort to pre-empt the market. As news gets out that the market is shifting, buyers are starting to slow down and finally we are seeing inventory staying on the market more than a few days. This has advantages.
For the time being the new dynamics are attracting a new set of buyers who never were interested in the rat race of competing for a home. Making a decision within hours of viewing a home, foregoing an inspection, or offering non-refundable earnest money is not for everyone. Today’s buyers have the leisure of coming back through for a second showing, of looking into possible home improvements, of lining two options up side-by-side to see which one they prefer.
I expect this will be the status quo through the holidays. Thanksgiving to Christmas is always a slower time as many people are tied up with family obligations. Come early 2023, we’ll see how the interest rate environment is impacting price.