The past year saw many home buyers and sellers taking a wait-and-see approach as the pace of home sales experienced a downward trend. This was largely influenced by the Federal Reserve's series of interest rate hikes, resulting in higher borrowing costs and record-high home prices, leading to the most notable real estate market slowdown since the 2008 recession.
Many potential buyers found themselves priced out of the market, causing a delay in their plans for homeownership. Simultaneously, current homeowners, reluctant to let go of their pandemic-era mortgage rates, have been hesitant to sell, leading to a sharp decrease in listings. However, there may be some relief on the horizon. The Fed indicated that it had concluded its interest rate hikes and hinted at a potential 0.75% rate cut over the coming year. While mortgage rates do not directly follow the federal funds rate, they typically move in parallel, suggesting the possibility of more affordable home loans in the near future.
Even with 7-8% interest rates over the past year, housing prices have held up incredibly well as the balance between lower demand and low supply has contributed to stability. However, the economy is now showing signs of weakness with a slowdown in employment gains and some stress growing on consumers due to the often-lagged economic effect of monetary policy tightening. While there are talks of a possibly mild recession next year, it's not clear how home prices will be affected. Some economists expect a positive return for 2024, while others expect a slight negative return.
The expectation of lower rates is likely to see sales volume rise and added inventory to the market. More recently, we have seen a noticeable increase in inventory in many markets across the country as well as locally, although we are still not back to pre-pandemic levels. There’s also evidence that the patience of holdout home buyers may be waning, despite higher borrowing costs. A recent survey by Bank of America found that the number of people willing to wait for prices or mortgage rates to decline before making a purchase fell from 85% to 62% in just six months.
While national real estate forecasts provide a broader perspective, real estate is inherently local. If you are considering buying or selling, please reach out for information specific to your area. Thank you for your continued trust, I look forward to guiding you through the evolving real estate landscape and helping you achieve your goals.
Bounce Williams | Realtor | DRE: 01387798
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Bounce Williams