There is no doubt that higher mortgage rates are beginning to temper buyer demand for housing. But, will weaker demand lead to price reductions on listings and/or slower rates of appreciation? Time will tell.
In just the last few weeks, our 14 Realtors have seen the impact from stiffer loan rates. Buyers are not qualifying to buy as much house as they did earlier. Most are staring at monthly payments $200 to $400 higher than in the first quarter of 2022. Some are being priced out of the market.
Sellers, too, are beginning to realize that their listing may not sell within 48-hours, and perhaps could have a shelf life of 15 to 45 days on market. Trust us, it's still a very warm seller's market, but just not scalding hot like during the last 18 - 24 pandemic months.
Inventory remains very, very low by historical standards, but is starting to creep in the other direction now. Nationwide, May saw the largest jump in housing inventory -- 107,000 units -- in the past five years per Mortgage News Daily. Not surprisingly, Re-Fi's of existing mortgages took a 90% tumble from May of 2021.
The sale of rental properties is starting to take a hit, too. The days of buying them with cheap mortgage rates are over for now. Start expecting 5.75% to 7.75% rates with a 25% or 30% down payment going forward. Numbers like that will put an immediate damper on your projected Cap Rate and choke monthly cash-flow to a trickle. Ouch!
So, where does this leave us here in West MI, where year-to-date home values still are up 13.3% to an average sales price of $338,207?
Well, if you need a home, buyers should not bail on the market right now. There is less competition for listings than earlier this year, which means multiple offers won't be as frequent, which means buyers might actually get a chance to negotiate offers and have inspections again. Those dreaded words of "highest-and-best" should be heard less and less in coming months.
If you're selling, don't hesitate to list. Capture the seller's market before it wanes to a more balanced market. We think the days of hyper-valuation increases are soon coming to an end, so stay within a market-value list price and be prepared to have a dialogue with your buyer vs. dictating all terms of the purchase agreement.
Thinking of buying or selling in these challenging times? Give us a call – we’ll help you put together the best strategy to navigate this ever-changing market.
Bob & Lisa
616.437.0200 & 616.437.0209
