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The only thing constant in life is change as they say- and real estate is no different. But after an oddball summer, change may be in the air. Read on for what we have seen this summer and what may be in store in the months ahead. The market this summer has been hit or miss. Some homes have garnered significant attention, plenty of showings, and solid offer activity. Other homes, even those in great condition and great locations have languished, especially in the luxury markets. Buyers have been understandably hesitant due to high interest rates and sketchy economic news. A distracting election cycle and political unrest may also be contributing to what has felt like somewhat sluggish buyer activity. We have seen a stabilization of home prices as things remain relatively flat through the summer, but even with this stabilization of prices, the interest rates have kept buyers hesitant. With more homes to look at, the urgency that has been synonymous with our market for years has been missing. Median Sales Price Across the MLS |
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So why may change be in the air? It has to do with jobs. According to the Associated Press, the most recent jobs report from last week showed that the US added 114,000 jobs in July, significantly less than expected. Also cited was the fact that unemployment has risen over the last four months. This jobs report, in tandem with reports showing inflation is coming under control, has led many to suggest we may have multiple interest rate cuts this year. As the Fed cuts the interest rate, this filters to mortgage rates as well. We know there are many buyers waiting for rates to drop to get into the market, and had we seen rates drop earlier in the year, the market would likely have picked back up to a brisk pace. However, now with some economists' concern of whether or not we are on the path to a recession, it's unclear if the expected interest drops will have much impact on the housing market this year- especially as we head into fall time and what will surely be a turbulent election cycle. It's possible that we will need to see signs that point in a more positive direction for the overall economy before seeing lower interest rates drive demand back up significantly. This graph shows how the 30 year fixed mortgage rate fluctuates in tandem with the Fed funds rate |
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Mortgage rates have already started responding to the recent economic data and dropped about .5% last week. Then, this week, they rebounded back up to the ~6.6% range according to Mike Echery, a broker with Greenlight Mortgage. It's too early to tell if interest rates will continue a downward trend, but even a .5% drop makes homes more affordable than they've been at any point this year. A 1% drop in mortgage rates translates to a few hundred dollars a month for most mortgage payments, so if you're a soon-to-be home buyer (or really, home seller too), fingers crossed that we see drops of 1% or more as you'll find the market conditions that are created will be much more palatable for whichever type of transaction you are hoping to complete. Real estate is hyper-local and there are contrasting markets in different price ranges so if you have questions about how these market dynamics may impact your specific situation, don't hesitate to reach out! Until next time! Allison and Ken |
