What You Can Expect from the Spring Housing Market
As the spring housing market kicks off, you likely want to know what you can expect this season when it comes to buying or selling a house. While there are multiple factors causing various levels of uncertainty, (including the current conflict overseas), rising inflation, and the first rate increase from the Federal Reserve in over 3 years — the housing market seems to be relatively immune so far.
Here’s a look at what experts say you can expect this spring.
1. Mortgage Rates Will Climb
The 30-year fixed mortgage rate has increased by more than a full point in the past six months, partly due to the Federal Reserve raising short-term rates. They have indicated that there will be further increases and despite some mild fluctuation during the past few weeks, experts believe rates will continue to edge up over the next 90 days.
If you’re a first-time buyer or a seller thinking of moving to a home that better fits your needs, realize that waiting will likely mean you’ll pay a higher mortgage rate on your purchase. And that higher rate drives up your monthly payment and can really add up over the life of your loan.
2. Housing Inventory Will Increase
There may be some relief coming for buyers searching for a home to purchase. Realtor.com recently reported that the number of new listings has grown for each of the last two months. Also, the National Association of Realtors (NAR) just announced that the month's worth of inventory increased for the first time in eight months. The inventory of existing homes usually grows every spring, and it seems, based on recent activity, the next 90 days could bring more listings to the market.
If you’re a buyer who has been frustrated with the limited supply of homes available for sale, it looks like you could find some relief this spring. However, be prepared to act quickly if you find the right home.
If you’re a seller, listing now instead of waiting for this additional competition to hit the market makes sense. Your leverage in any negotiation during the sale will be impacted as additional homes come to market.
3. Home Prices Will Rise
Prices are always determined by supply and demand. Though the number of homes entering the market is increasing, buyer demand remains very strong. Nationwide, there are more new listings for March 2022 than March 2021. However, the housing supply will take years to catch up to demand due to millions of millennials ready to buy their first home.
What does that mean for you? With the demand for housing still outpacing supply, home prices will continue to appreciate. Many experts believe the level of appreciation will decelerate from the high double-digit levels we’ve seen over the last two years. That means prices will continue to climb, just at a more moderate pace. Most experts are predicting home prices will not depreciate.
Won’t Increasing Mortgage Rates Cause Home Prices To Fall?
While some people may believe a 1% increase in mortgage rates will impact demand so dramatically that home prices will have to fall, experts say otherwise. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae says, “What I will caution against is making the inference that interest rates have a direct impact on house prices. That is not true.” Freddie Mac studied the impact that mortgage rates increasing by at least 1% has had on home prices in the past. Here are the results of the study:
As the chart shows, mortgage rates jumped by at least 1% six times in the last thirty years. In each case, home values increased.
So again, if you’re a first-time buyer or a repeat buyer, waiting to buy likely means you’ll pay more for a home later in the year (as compared to its current value).
The Bottom Line
There are three things that seem certain going into the spring housing market:
- Mortgage rates will continue to rise
- The selection of homes available for sale will modestly improve
- Home prices will continue to appreciate, just at a slightly slower pace
If you’re thinking of buying, act now before mortgage rates and home prices increase further. If you’re thinking of selling, your best bet may be to sell soon so you can beat the increase in competition that’s about to come to market. Call Sandy at 928.458.1364 or David at 928.458.1373 with any questions about buying or selling.