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Rate and Inventory Challenges Dominate Fall Market

Rate and Inventory Challenges Dominate Fall Market

“With interest rates rising rapidly since the beginning of the year, buyers and sellers are having a difficult time adapting to the market’s new normal” is a recent quote from the California Association of Realtor President, Otto Catrina. He further states that “as the market continues to evolve over the next 12-18 months, Realtors will be playing an ever-more important role as trusted advisors to guide through the complicated buying and selling process and help them overcome their obstacles during these challenging times”. These are challenging times for sure as expectations are still shifting and many are uncomfortable with all the changes that have taken place in a short time. Let’s go over the latest data and see what we can expect for our “Holiday market”.

In the past few weeks, rates have continued to climb, reaching over 7.08% by the end of October. The impact of higher rates meant decreased number of mortgage applications. The number of requests for a new loan is about 42% lower than it was last year at the same time. Of course, that also means, lower number of offers on both existing and new homes. New home sales have declined 10.9% in September, increasing inventory to 9.2 month compared to 8.1 month in August. Of course, that’s good news for buyers. If you ever considered purchasing a new home, this is definitely a great time to find incentives and credits as builders are looking to unload their existing portfolio.

Existing homes sales have followed a very similar trend to that of new homes. Resale homes seasonally adjusted rate was down 2.5% from August, but 30.2% down from 12 months ago. Year-to-date sales were also down about 16.5%. Statewide median home prices are holding for now at $821,680 which is about 1.6% higher than September of 2021. The biggest change sellers have noticed is the amount of interest from homebuyers or more accurately the lack of it. I hear the reports of many listings going without ANY interest for weeks at a time. This is definitely the time when sellers need to price their home competitively and make sure it shows in its best condition on day one or they will be chasing the market downward through the holidays. Housing inventory for re-sale homes is nowhere near as high as new homes, simply because so many current homeowners bought with really low interest rates that they are not interested in moving, but we have still seen an increase in the number of available homes for sale from 1.9 month to 2.9 month of inventory.

With the Feds latest comments suggesting further increases in rates, this holiday season might be the best time to negotiate a great deal either on an existing home or a new home, but do it with the guidance of your Realtor. They are the most accurate source of information in this ever-evolving market.

This article is written by Tunde Baker, Senior Vice President at RE/MAX Grupe Gold. Tunde is a broker with over 21 years of real estate experience. Information was provided by the National and California Association of Realtors.