The tides have changed in real estate, and the topics of interest rates and inflation are enough to spoil that December eggnog buzz. With all the conflicting news reports and water cooler chatter, how can you know what to believe when it comes to your next home purchase?
According to Forbes Money, here are the facts:
- Mortgage rates have nearly tripled since this time a year ago.
- There is a 41% decline in new loan applications year-over-year.
- Outside of economic uncertainty and concerns about an oncoming recession, the massive increase in mortgage rates is one of the top reasons mortgage demand has dropped.
Considering these sobering facts, it would seem that the idea of purchasing a home anytime soon is a certain bad idea. (And with so much speculation about the 2023 economic forecast, it can be hard to make the right decision.)
However, if you’ve landed on this blog, then perhaps early 2023 is bringing with it a deep want or need to buy a home. If that’s the case, fear not! There are some very optimistic considerations to make. We’ve rounded up some of the best and most unique viewpoints from experts to show you the other side of this financial conversation.
Mortgage rates are dropping in late 2022
According to a new report by Freddie Mac, the average 30-year mortgage rate decreased this week for the third consecutive week as markets gain confidence that interest rate spikes will slow in 2023.
"Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes," Freddie Mac Chief Economist Sam Khater said in a statement to Fox Business. This optimism is a sign that we “don’t know what we don’t know” and aren’t privy to what the future holds.
Price gouging is a thing of the past
In the pandemic days of 2021 and 2022, buyers were paying far above asking price, often facing tight bidding wars and overpaying for property based on demand. Insider Business suggests that with high inflation and a series of aggressive rate hikes from the Fed that weaken US consumer sentiment, a downturn in housing costs is probable. Ivy Zelman, the CEO of Zelman & Associates says in a recent interview "If we don't see any type of improvement in the economy and rates are higher than 6%, then I think you're going to see pricing continue to decline nationally in the magnitude of 20%.”
Buyers are getting their groove back
Sophia and Jason of KlopasStratton want you to remember that the real estate market is NOT all doom and gloom. (If you want to discuss your personal housing goals with the best in the biz, look no further.) They believe that there is real opportunity to purchase in the current market – where the 2021 + 2022 pattern of paying $100,000 over asking price at 3.5% fared terrible for prospective buyers.
In that same vein, Jack Hawthorne, CEO of Keller Williams Heritage tells KSAT.com: “What we are seeing is that buyers now have much more power in the negotiation, because instead of seeing 27 offers on every listing, you’re seeing three. Instead of seeing 50 to $60,000 over asking, you may see $5,000 over asking.” In other words, buyers are taking back the power this year, and that is good news.
So, what are the next right steps for homebuyers?
Instead of shying away from entering the homebuying market, commit yourself to asking the right questions so that you can make an educated prediction and ultimate best decision for yourself and your finances. Things seem ominous in real estate currently, and there are some very real statistics to consider before moving ahead with your American Dream. However, it does us all well to remember that what goes up, must come down. Everything happens in its time, and our job is to ensure we’re inquisitive enough to consistently question what we’re being told by “them” so that we can make the perfect next move for ourselves.
Catch us back here bi-weekly as we bring you curated and Chicago-based real estate content (with a life coach’s twist).