The market for real estate is changing. The current market for real estate is changing, just like most things since the pandemic. It’s not possible to make any projections, but it’s one that you have to wait and see. The Fed’s recent interest rate changes have helped to slow down the market for runaway sellers in certain areas that had dominated the past few decades. There seems to be a cooling down. Monitor real estate developments in the coming months before you sell your house and purchase a new one. Continue reading to learn more about the current market, its future, and where it will be in the next few months.
Real Estate in a Post-Pandemic Market
Although the pandemic caused havoc in many people’s lives, there were some positive outcomes. The real estate market may have had a rough start due to lockdowns. The Spirit Lake real estate market boomed to unprecedented levels not seen in decades after the pandemic lockdowns. Sellers were selling houses at far higher prices than the asking price. Low inventory and low-interest rates fuelled the fire of home sales that could not be stopped by the Fed’s recent interest rate increases. Although sellers could profit from this market, buyers continued to struggle in this market with strong sellers.
The seller retains firm control over the market
Sellers still hold the current market even after interest rate increases. A recent study found that sellers still hold 95 per cent of the realty market, compared to 98 per cent during the first quarter of 2022. There has been some improvement in the Fed’s efforts to curb inflation and balance the real estate market. Only time will tell. The highest mortgage rate since 2009 is at 5.25 per cent. This significant change has begun to affect the buying power of many low-income and middle-income buyers, regardless of whether they are first-time or seasoned buyers. However, cash buyers and high-income buyers can still purchase.
One thing that has yet to change is the amount of inventory available for purchase. The housing shortage in many hot markets will continue to drive up prices. Affordable housing will remain a problem until builders build more homes and more people overcome their fears about the current economic trends. Some buyers will remain away from the market as the risk of the recession continues and the cost of living continues to rise. While the Fed is trying to control the market, it could take months or even years for the real estate market to recover its equilibrium. The sellers are still in control.
What will buyers do to the market now?
Given the market’s constant twists and turns, you might be wondering if you should buy a home here. Many potential buyers wait to see if this market makes a comeback. The Fed has put a halt to this market that is characterized by high-sellers, but inventory remains at an all-time low. What can you expect from a buyer in this market?
The First-Time Homebuyer’s Dilemma
This market is already a slippery slope for first-time homebuyers. Although the current interest rate increases have slowed down the seller’s market, they are also reducing homebuyers’ purchasing power. The interest rate has risen from 3.3 per cent at 2022’s beginning to 5.25 per cent in just a few months. The Fed could increase it in the coming months to curb inflation and stabilize the real estate market. This is good news for the economy, but it could not be suitable for first-time homebuyers. Before the interest rate increased, first-time homebuyers were priced out by other homebuyers. The plans to improve the economy could also make them less attractive. Potential buyers who have never been approved for financing are being denied. These changes may not be beneficial to you as a first-time buyer.
Seasoned home buyers
Seasoned homebuyers might face the same problems as first-time buyers in this market. They may be able to leverage more than first-time homebuyers because they already own a house. They can sell their house to get the cash they need to buy a home. It is even better if the sale price is higher than the market. This cash can help with down payments and other home-purchasing costs. There is still the problem of inventory shortages. Sellers may decide to sell their homes and then find out that there is no inventory available. Many homeowners are forced to rent their homes until they can purchase a new house. Although you might have more success as a seasoned buyer than first-time buyers, finding a new home may still be tricky.
Renters are being forced to buy a home
Renters are also experiencing a new standard in this market. Many renters are looking to purchase a home. Rents have risen since 2021 due to the national rental crisis. Renters have experienced increases of up to 11 per cent in their rental payments, while rents have risen as high as 40 per cent in some areas. Many renters are finding that houses are more affordable than renting because of the steep rise in rent. Renters may be better off buying a home. You may face the same problems as first-time homebuyers.
What is the future of the real-estate market? Given the state of many other parts of the economy, it’s difficult to predict if interest rate increases will make a difference. Inflation is high due to high gas prices and the rising cost of food. Some markets may experience a cooling-off period, which could last until the end of this quarter. It is a great time to think strategically about how you move forward with home buying. This cooling-off period may bring in much-needed inventory and help to balance the real estate market.