Much ado has been made about the lack of buyer demand. This is not nothing. Buyer demand is certainly below the normal average! There are two reasons for this, and you’ve heard at least one of them:
- High mortgage interest rates. While rates have come down off their peak of over 7% last year, they are still considerably higher than people were getting just over a year ago. 5% seems to be the new normal and many are beginning to accept that. Demand has been increasing steadily.
- Scarcity of houses. When there aren’t a lot of houses available, buyers become discouraged. Interestingly, it is probable that the higher interest rates are also keeping inventory low as well. Many out there would have to exchange an interest rate in the 2s, 3s, or 4s for one in the 6s if they were to make a move right now. That’s a tough pill to swallow. So we see that high interest rates are effecting demand AND supply.
So, while demand is low, supply is lower still, and has been trending lower and lower with alarming steepness. The fall and winter market reprieve is over. If you were waiting for a correction in the Real Estate market, you may have already missed it.
Missed the Correction Already?
A fair number of people tell us they are waiting to buy until either interest rates, prices, or both come down. Again, we don’t see prices coming down soon (never say never), but there is definitely a world where interest rates go down into the 5% arena or even better. This would be the same world where inflation gets back down to normal levels.
The problem with that, however, is that when rates come back down to that point, the buying flood gates may burst open again. This could turn an already hot market into a boiling one reminiscent of 2021 and early 2022.
If you are hoping to buy a home within the next couple of years, I might consider moving your timetable up. It might be that interest rates do come down. Then, refinancing will be a possibility, and you will have captured a better purchase price in a less competitive market. If they don’t come down, or they go up further, you will be glad you didn’t wait.