Buying a house during the past almost three years can be compared to a rollercoaster ride. You go up and you go down, you scream and you hold your breath waiting for the next hairpin turn. But maybe, just maybe, we’re starting to see the end of the ride.
The National Association of Realtors reported at the end of last year that the sales of previously owned homes, most of the real estate market, slid 17.7% in 2022. Also, on a month-to-month basis, sales fell 1.5% in December for an 11th straight monthly decline, the worst rate since November of 2010.
The housing boom generated by the pandemic and the ability for workers to work remotely accelerated selling prices and demand until the Federal Reserve stepped in to cool the economy and curb inflation by raising interest rates. This took a big chunk out of the ability of buyers to proceed with purchases when borrowing rates more than doubled.
As recently as October of last year, mortgage interest rates climbed over 7%, a rate not seen for two decades. This, plus the increased asking price of homes, forced many buyers out of the market since they could not qualify for the additional monthly carrying charges. Now, however, the rates are starting to trend down, and as of Feb. 5, Forbes reported the following average annual percentage rates (APR) rates: 6.37% for a 30-year fixed mortgage and 5.56% for a 15-year fixed mortgage, the two most popular mortgage products.
The forecast for 2023 is that 30-year, fixed-rate mortgage rates will stay within the 5% to 6% range. Freddie Mac forecasts the average 30-year mortgage rate to start at 6.6% in the first quarter and end up at 6.2% in the last quarter of this year and Lawrence Yun, the National Association of Realtor’s chief economist said, “Mortgage rates have fallen for the past few weeks, so I’m very hopeful that the worst in home sales is probably coming to an end.”
The other bit of good news is that the Federal Reserve raised their benchmark interest rate by only a quarter of a percent rather than a full half percent, which they have been doing monthly for some time. All of this may point to the fact that the mortgage rates have hit their peak, advertising to buyers and sellers it may be time to get back in the game.
Next week when we review the January sales statistics, we’ll have a better idea if our local market is starting to show an increase in sales activity and available inventory. As far as affordability, the asking prices on the Island are as high as ever and the construction of new homes is on practically every street. If the city of Anna Maria is second in Florida’s most expensive median listing price, as recently reported by Realtor.com, it will take a lot to turn that around any time soon.
So, just like getting off the rollercoaster, it takes you a few minutes to get your land legs back under you and wait for your heart to return to a normal beat. Everyone’s hoping this is that time… prices are still high but leveling off, mortgage rates are gradually declining and sellers who have been sitting on their super-low mortgage rates may start to reconsider the financial benefit of selling. However, stand by – there’s always another rollercoaster coming down the track.
