As homebuyers get used to the new reality of increased mortgage rates, it is evident that the housing market has calmed from its global economic turmoil. The market’s overall health should be a key consideration when deciding if now is the ideal time to buy or sell a house. People can decide whether it’s a good moment to purchase or sell and what might happen to the market in the future by knowing how near the market is to a healthy level of activity. For the past years, there have been more homebuyers than sellers. Bidding wars broke out, home prices skyrocketed to record highs, and affordability was strained as a result of this supply and demand disparity. However, the housing market is finally beginning to slow down. Despite being in the double digits, the increase in home prices is decreasing. Additionally, the number of houses for sale is growing as a rise in mortgage rates slows down sales activity. Existing-home sales potential is currently 1,336,000 (SAAR), or 19.7% below the pre-recession market potential peak that happened in April 2006.
“Slowing sales are a symptom of a housing market that’s coming off of a two-year pandemic-influenced frenzy and settling into a pace that’s more in line with historical norms.”
Mark Fleming, First American
The Housing Market: A Prospective from Homebuyers’ View
The median household income climbed by about 4.7%, but this rise was insufficient to make up for the affordability hit by the 2.5 percentage point increase in the 30-year fixed mortgage rate. As a result, one of the main causes of cooling demand saw a 23% reduction in purchasing power. Housing affordability is still a challenge. household formation remained strong despite the year-over-year fall in affordability. Since buying a home is a financial and lifestyle choice and many millennials are approaching marriage and family formation, the surge in household formation produced 60,000 potential home sales in July 2022. In addition to experiencing higher rent, many of these households are considering buying a home sooner rather than later.
The Housing Market: A Prospective from Home Sellers’ View
Homeowners who decide not to sell decrease the housing market potential by 84,000 sales in comparison to one year earlier since they are also potential home buyers. Nevertheless, today’s homeowners have record-high equity levels, and as that equity rises, they seem to be more convinced about utilizing it to buy a new home that better meets their specifications. Potential home sales increased by 154,000 over the previous year as a result of rising housing prices.
The Bottom Line:
The housing market is now adjusting to the new normal. It is showing signs of slowing down as it settles into a pace more consistent with historical averages after a two-year frenzy brought on by the crisis. There are numerous advantages to enter the market from the standpoint of both property buyers and sellers. The fact that millennials are still entering their prime home-buying years will maintain long-term demand consistently.
What To Do:
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