Our real estate market has been ever so challenging for buyers with inventory levels at near all time lows. In fact the MLS reported the tightest levels ever in some local market areas in January. I am still amazed that buyers expect to kick sellers in the face with lowball offers, but they still do it.
There is a time for that because sometimes a seller is is asking for the moon and stars with their pricing and buyers may be able to negotiate a lower price in those specific cases. If a seller however is priced close to market they don't need to even ponder a lower than asking price. We only have a 2 week supply of resale homes and the new home market is dogged by increasing materials cost and supply chain jam-ups.
It is a seller's market for sure. But this has been an issue for quite some time. Now we have the added issue of a rising interest rate market. Buyers looking to borrow money from a bank are seeing rates move back up towards the normal range. It has to be noted here; interest rates have been heavily suppressed for several years. The fifty year average is still around 6%. So any rate under that is historically a good rate. But buyers have been spoiled with 2.5-3.5% rates for so long the payment shock at 4.5-5% will be tough to handle.
Many buyers will simply be payment priced out of the market. Meanwhile pricing will continue to feel upward pressure until the inventory levels return to a more neutral 4-6 months. When inventory levels push beyond 6 months, price softening becomes likely. We are a long way away from that.
Buyers need to pay very close attention to interest rates. Rate pressure is intense right now with economic conditions producing 40 year high inflation levels. The last time we faced this kind of inflation mortgage rates were deep into double figures in fact in 1982 rates were around 18%.
This is not the time for buyers to sit on the fence. Any significant market correction is likely more than year away unless some other catastrophic event occurs like the 2008-11 super recession. I don't see that happening, but I do see inventory levels stabilizing by the end of this year or early next. Buyers that wait till then could be facing 30 year fixed mortgage rates in the 6-7% range. Low mortgage rates are much better than low prices if you intend to stay in the house for more than 5 years and frankly, if you buy a house you should stay in it for at least five years.
Buyers, it's time to make an offer.
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