You’ve probably heard that the housing market is in a period of “transition.” To be sure, we’ve seen a transition from a seller’s market to a buyer’s market. Gone are the days of crazy bidding wars, houses selling in hours after listing on the MLS, waiving every contingency imaginable, etc., etc. These factors favor prospective homebuyers. However, we’re also seeing a spike in interest rates and you don’t have to be a rocket scientist to know higher rates = higher monthly mortgage payments. Affordability is a concern for sure, and this has many would-be-buyers sitting on the sidelines waiting for the perfect opportunity. Let’s look at three key reasons you should not sit on the sidelines for long.
- The supply of homes is increasing.
- Home prices are not expected to drop considerably.
- Mortgage rates are down from recent peaks.
Earlier this year there were 1.6 months’ worth of housing supply. That figure has over doubled to 3.3 months in October. According to the NAR (Nat’l Association of Realtors) new listings and longer time on market are contributing to the increased supply. With more homes to choose from, buyers are more likely to find that dream home and face less competition from other buyers.
It’s not 2008 all over again — Housing prices are not expected to crash, and many experts are forecasting continued appreciation, albeit at a much slower pace. For 2023, the average of expectations points to a “neutral” year. If you’re waiting for a fire sale, it might be a very long wait.
Mortgage rates are coming down from recent highs and stabilizing as inflation expectations moderate. Keep a close eye on inflation developments though, because inflation directly affects the bond market, which in turn affects mortgage interest rates. All else remaining equal, moderating inflation = lower interest rates and rising inflation = higher interest rates. It’s widely anticipated that interest rates will remain elevated in the near term, so if you’re able to comfortably afford your new home, you should not wait for rates to fall further. Also keep in mind that those sideline folks are waiting to jump into the market. You have the advantage of getting in before they do. Most importantly, you will have the chance to refinance. “Date the rate, marry the house.”
