The trend of higher home prices and higher mortgage interest rates continued to March, requiring larger down payments and higher monthly mortgage payments.
The Monthly Housing Trends Report from Realtor.com shows that the median home price hit $405,000 for the first time ever in March.
But that surge in home prices might be enough to cool down a housing market that has been red-hot since the start of the COVID-19 pandemic.
“Despite the $405,000 price tag, March data reveals we are starting to take some steps towards a more balanced market,” said Danielle Hale, chief economist for Realtor.com. “Buyer demand is moderating in the face of high costs, and we’re beginning to see more homeowners take price cuts on their listings and overall inventory declines lessen in response.”
Rising interest rates
At the same time, potential buyers are facing headwinds from rising interest rates. Freddie Mac reports that March ended with the average 30-year fixed-rate mortgage rate at 4.67%, the highest in four years.
“Mortgage rates continued moving upward in the face of rapidly rising inflation as well as the prospect of strong demand for goods and ongoing supply disruptions,” said Sam Khater, Freddie Mac’s chief economist. “Purchase demand has weakened modestly but has continued to outpace expectations. This is largely due to unmet demand from first-time homebuyers as well as a select few who had been waiting for rates to hit a cyclical low.”
Tara and Shannon Gannon of Team Gannon Real Estate, a Long Island, N.Y., firm, are seeing the effects of rising prices and rising interest rates.
They tell us it could create a more stable market in the months ahead and reduce the number of bidding wars that have frustrated many would-be buyers.
“Buyers are aware of the rising rates and might not be so inclined to offer tens of thousands of dollars over asking prices,” the team told ConsumerAffairs. “We have also noticed an increase in price reductions.”
Because of these conditions, the Gannon Team predicts a lighter spring real estate market, as some homeowners with low-interest rates may be reluctant to sell and purchase another home at a higher rate.
Home constructions pick up speed
The Realtor.com report also found a substantial increase in new home construction, something that could help alleviate an acute housing shortage that has persisted for years.
“Assuming all these factors and new construction hold steady, we could begin to see inventory increases this summer – welcome news for buyers who have endured pandemic home shopping and can continue their journey despite higher buying costs,” Hale said.
Hale says the current conditions may spark a flurry of buying before rates rise even more.
But on the flip side, she says buyers who are able to put off a home purchase for a few months may find more homes to choose from in mid to late summer.
Photo credit: Source.
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