Those who want to sell their home may have heard that the housing market has slowed in recent months. While it is still a sellers' market, the market's peak frenzy of the last two years has subsided somewhat. So, people should not worry or wonder if they have missed their chance to sell or buy a home and move. The good news is that they have not, and plenty of opportunities are still available. Wondering if it's still a good time to sell or buy a home? Check out this inventory update for insights on the current real estate market.
Cooling Market Competition
There is a drop in new listings in July. This situation suggests that some may have missed an opportunity. Hence, buyers and sellers should always look out and capitalize on good market conditions. On the one hand, there is an increase in available-for-sale home options. This scenario has resulted in a more buyer-friendly market this year compared to last. In July, asking price growth and per square foot remained moderate, and the share of sellers making price reductions increased.
Additionally, competitive conditions remained in sellers' favor in July this year. As a result, home prices have remained near all-time highs. And, time on the market remains lower than pre-covid levels.
But, there are indications of a broader slowdown in the housing market. This data is consistent with previous expert predictions. So, the significant cooling in buyer demand is because of higher mortgage rates. Nonetheless, buyers are still interested, which keeps the market competitive. This situation happens even more often for attractive homes that are well priced. So, those who want to sell their home must work with an agent to price it well for today's market. As buyer demand falls, it is critical to remember that this is not the same market as last year. It is not even the same market that existed a few months ago.
Stable Mortgage Rates
The big surprise for those looking to buy a home in the first half of the year was how fast mortgage rates rose. According to Freddie Mac, 30-year fixed-rate mortgage interest rates rose in January. From 3.22% in early January to a high of 5.81% in June this year. In recent weeks, average rates have remained stable at around 5.5%. According to Redfin, about 15% of people who signed a contract to buy a home backed out due to the high cost of financing. This is the highest amount of canceled sales since April 2020, back when the market ceased due to the pandemic. Experts say mortgage rates may rise or fall in the coming months. But even if these changes happen, the biggest jumps have already occurred. Experts think rates have already adjusted. The rates are already "priced in" in the current and expected interest rate hikes. Experts also predict that mortgage rates will settle near 6% by the end of the year. But, home sales will normalize once mortgage rates become more stable.
Higher Inventory
As the market slows, potential buyers who continue to look for a home will face less competition. There will also be more options and breathing room than in the frantic market of the last two years. Economists were correct in their home price projections for the first half of the year. The annual price growth peaked in the spring and moderated as the year progressed. But, sales are much lower than expected at this point in the year. Soaring demand to buy a home over the last two years has resulted in a record low inventory of available homes. As a result, it drove up prices. And, inventory experienced its first year-over-year increase in three years in June.
But, the market shift appears to be having the opposite effect on seller activity. The number of new listings has been falling for the first time since March. This scenario suggests that some homeowners are rethinking their plans because of trends. Some of these recent trends include the decreasing number of homes under contract. Despite the new seller drop, active listings increased at a record-breaking rate. This event happened for the third consecutive month in July. This event only indicates that a real estate refresh is on the way for 2022 buyers.
Affordable Housing Market
In July, the median price of a home reached a new high of around $400,000 for the first time. But, the rate of price rise has recently slowed. As stated before, the median home price for existing homes increased in July. New construction homes account for about 10% of all transactions while existing homes account for the remaining 90% and prices for the vast majority of the market are not falling. Experts expect home prices to rise 11% this year. This forecast exceeds the 16.9% year-over-year increase from 2020 to 2021. But, it is more than he predicted at the start of the year. Higher mortgage rates will dampen buyer demand. As a result, inventory will rise, and sales will fall, causing prices to moderate for the rest of the year. Homes may also end up being on the market for a more extended period of time. So, there will be more properties with price reductions. Buyers who do more research may end up finding a home with a price reduction or get a better price negotiation.
Final Thoughts
So far this year, the real estate market has not gone as planned for many prospective homebuyers. Home prices, which were already at an all-time high, have continued to rise. Mortgage rates have also risen much faster than expected. But, as recession fears for the broader economy grow, the housing market is slowing. New home sales are down, and construction is coming to a halt. Existing-home sales have fallen and are now trending lower than in 2019. The updated 2022 forecast reflects a market that is on a more stable path than in the previous two years. Despite trailing 2021 levels, experts predict home sales to hit a near-record high in 2022. Time will tell how the market and inventory will fare as we approach the holidays.
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