When will competition in the housing market drop?admin
Mortgage rates on 30-year fixed-rate loans have risen from around 3.5 percent earlier this year to as high as 5.6 percent, and experts believe they may increase further (see the lowest mortgage rates you can qualify for here). In addition, according to CoreLogic, house prices have also risen steadily, jumping by nearly 20% between March 2021 and March 2022.
That news, no doubt, causes a sigh among prospective homebuyers. But there is also some good news: there are signs that competition in the housing market may be cooling down, according to experts.
According to Redfin, the homebuyer competition fell slightly in March 2022 for the first time in six months. Sixty-five percent of properties sold by Redfin agents experienced competition — or multiple offers — in March 2022, down from 67 percent in February. “I expect competition to continue falling,” says Taylor Marr, Redfin’s deputy chief economist.
Marr highlights the change to a variety of factors, including rising interest rates (the current average for a 30-year, fixed-rate mortgage is more than 5.6 percent), Federal Reserve policy continuing to move to reduce inflation, baby boomers remaining in their homes rather than moving to retirement communities, and the conflict in Ukraine. “Homes are still selling over asking price,” Marr adds, “but the market is shifting.”
According to Lawrence Yun, chief economist of the National Association of Realtors, “the combination of increasing interest rates and rising house prices may push some would-be buyers out of the market, potentially resulting in the reduced competition after the summer buying season is over.”
Marr believes that there will be less competition for listings among buyers and more houses on the market towards the end of the summer. However, he warns that certain places that have become attractive migration destinations, such as Tampa, Nashville, and Atlanta, may continue to experience high levels of competition on listings.
Skylar Olsen, the chief economist at Tomo, forecasts a cooling of the market when competition decreases at the end of summer. “We’re in a transition era,” she adds about the current situation.
Despite signals that the housing market will slow in the coming months, buyers should not expect to find amazing offers overnight. “Home prices will continue to rise because there aren’t enough houses available to meet demand,” Holden Lewis, home and mortgage expert at Nerdwallet, said. “However, the combination of growing home prices and increased mortgage rates means fewer people will be able to buy.”
However, just because analysts forecast that interest rates will rise does not mean that purchasers should throw themselves into a bidding war because they are concerned about interest rates. “If you find the perfect apartment for you and know it’s a location you’ll be staying for a long time, you should move forward,” she advises. “However, you don’t have to rush to lock in a rate.”