Just when we thought rates could NOT get any higher, they did. If you are in the real estate business, you probably feel like you’re in a recession/depression. Business is like a rollercoaster; refinances are down 85% and buyers with these high interest rates are starting to freeze.
If the average home in the US is around $500K, you put 10% down, 740 credit and your all-in payment is around $3,871 at a 7.5% rate. If the rate was 5.5% all-in payment of $3,280, the rate of 3.5% all-in payment of $2746. When a buyer is looking to purchase, you quote them a rate and then they look at the payment, they lose interest right away. It does not make sense for most and affordability is at an all-time low. Buyers need rates to come down to make sense to purchase and feel like they can afford the payment. If rates remain this high for the next few quarters things are going to get very interesting. Inventory is also still at all-time lows, saving the housing market from having a major correction.
Fall and winter are typically the time to get a better deal when buying a house. Less inventory, fewer buyers and most people don’t want to move during the school year and holidays. With rates high, inventory low, and buyers scared to pay these high rates will this be a great time to pick up a deal or have a seller buy down your rate or pay closing cost? Last year clients were getting the best deals I have seen in years when the rates were higher and buyer demand was down.
The real estate market is more of a day-by-day or week-by-week these days. It is hard to look too far out of what is going to happen since we are in uncharted waters, and it is hard to predict what is going to happen. 2024 is an election year, we should know if we are having a recession, if will people finally pull back on spending, and if rates finally come down and stay down. Last time the 10-year treasury was this high and rates were this high after a real estate bull market we had the BIG crash of 2008. Fundamentals are way different this time and most experts don’t think we are going to have a real estate crash. Most are not expecting a hard landing aka a big recession. On the other side high rates are usually lower rates, will that be good to bad for the real estate market? It will all depend on if we get a lot more supply.
Buyers that close on properties today could regret their decision or they could look like geniuses.