The housing market this 2022 has been tense, pressure-packed, and unpredictable. As a result, home sellers and buyers are tracking key real estate data the way baseball fans do. Everyone wants to know where things are going in the real estate market in the United States. Are prices rising further? Will inventory continue to fall? And where on Earth will mortgage rates top out? Are things simmering down as the summertime comes to a close?
Cooling Market Demand
Usually, the months that comprise the majority of Q3 have slower home buying activity. For example, compared to Q2, the spring brings out more buyers than the summertime. That logic disappeared when the pandemic disrupted seasonal patterns in real estate. But, according to experts, we can expect a return to seasonality in the third quarter of 2022. Higher mortgage rates, home prices, and recession fears will also impact the market. So far, the housing-market activity has already taken a significant dip. Slower demand is likely to persist throughout the third quarter. The year-over-year declines in home sales and home price growth is evidence of the cause. Experts also believe that we will likely see more price reductions. This situation is partly due to seasonality, but sellers will also deal with slow demand.
According to NAR, existing-home sales have fallen for five months in a row. But data also suggests that the market usually recovers during the back-to-school season. The summer months are generally slower due to vacations and children being out of school. Still, housing market activity tends to pick up in the fall. Whether Q4 will follow traditional seasonal patterns in real estate remains a question.
Less Pressure on Home Prices and Inventory
The skyrocketing home price tags are also slowing — but not as much as buyers would like. Prices continue to be high and dry for buyers. Experts believe affordability is the primary concern in the housing market right now. NAR experts also think that home prices and mortgage rates have risen. As a result, it has been putting many potential first-time buyers out of the market. While buyer demand remains strong, home prices will continue to rise at a slower rate. As a result, this usually slow quarter for housing will be slower than usual. Many experts also add to the predictions of slowing market activity. They expect the third-quarter sales to be the slowest since around 2018.
Buyers are waiting to see what happens with interest rates and home prices. So, many potential buyers are waiting for the market to settle. But, there is a silver lining in all these which is the rising inventory. The supply of available homes for sale may become more favorable for buyers. This situation results in less upward pressure on home prices. Furthermore, it may even result in actual declines in pricing trends. After sellers had a clear advantage in the housing market, the scales began to tip more in favor of buyers. This status could be an indicator of seeing a step toward a more normal market.
Stable Mortgage Rates
Mortgage rates are unlikely to return to the all-time lows they reached earlier this year. But, they do appear to be leveling off as experts predict lower rates by the end of the quarter. Aggressive Fed action and growing recession fears will lower mortgage rates. For example, the average 30-year fixed falling to 5.25%, and the average 15-year fixed falling to 4.35%. Experts predict these rates to take place by the end of September. Any evidence of inflation easing will also help with lower mortgage rates.
Meanwhile, other experts see rates for the 30-year fixed mortgage loan to average around 5.5%. They see this happening through the third quarter, but that could change if the Fed raises rates. Adding another 75 basis points may cause another surge in mortgage rates. These changes, like what happened in June, will affect the rates in the coming months. So, homebuyers must be optimistic that there will be no surprises in the market. Because assuming that inflation expectations combined with weaker demand results in disinflationary pressures. With these, mortgage rates will likely remain at 5.5% or even fall to around 5.3%.
Longer Days in the Market
A national median of 31 days on the market does not give buyers much leeway. But, as experts explain, it is a significant departure from the 21-day median earlier this year. Experts expect that the pace will slow even more as interest rates rise. In fact, homes sold only four days faster than last year in the most recent week, as noted. They are selling faster than a year ago, but the gap is closing. As a result, experts predict homes to sell a little slower than last year. Buyers may now have more time to decide if a house is right for them. It will also be easier to secure financing if it has been on the market for a long time. Buyers may not feel pressed to make a decision they may later regret. Bidding wars will become less common and frantic. But, experts warn against using the number of days on the market to predict the future. Days on the market is a lagging indicator rather than a leading indicator. So, it is not always the first to change, but it does signal market balance.
Final Thoughts
So far in the third quarter of the year, the housing market has been experiencing a slight drop. These changes are happening in mortgage rates and signs of falling home sales. But, many experts believe that the near-term future after summer will be predictable. There will be lower or stabilized mortgage rates and fair home prices. Plus, lingering supply issues despite an increase in inventory will even out. Additionally, insiders in the industry are also concerned about a possible recession. If this ensues, it could alter prospects for the rest of the year.
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