Riding the Waves
Navigating the Current Real Estate Landscape
Amidst High Interest Rates
The real estate market is akin to a vast ocean, subject to the ebb and flow of various factors. One such factor that has recently made waves is the interest rate, hovering around 7.5%. While this may seem higher than the norm, a closer look reveals a nuanced scenario that could impact both buyers and sellers.
Interest Rates: A Brief Dip, but Still Riding High
Recent weeks witnessed a minor drop in interest rates (in fact, the largest single drop since July of 2022). The unsettling fact remains that rates continue to linger around 7.5% which is a difficult number for many to swallow. While this figure might seem elevated compared to what we've grown accustomed to, experts argue it's still within the realm of normalcy over the long run and certainly a welcomed figure compared to the 18%+ rates buyers faced in the 1980’s.
Higher Rates, Lower Demand: A Delicate Balance
Higher interest rates are achieving their intended purpose of cooling overall demand in the economy. This deliberate slowdown has manifested in an 11% increase in active home inventory compared to the same period in 2022. The shift is indicative of a market adjusting to the new financial landscape.
Cash Buyers and Steady Demand: A Stabilizing Force
Surprisingly, the market still boasts a considerable number of cash buyers who remain unscathed by interest rate fluctuations. Their presence, coupled with strong demand, has helped maintain a steady price per square foot over the past year.
Winter is Coming: Will the Market Go Into Hibernation?
As winter approaches, the real estate market traditionally experiences a tightening of inventory. In our resort/ second home market, sellers and buyers alike begin to shift their focus to the approaching holidays. With that said, sellers eager to close deals before the year's end may begin to lower prices in the Fall. This seasonal shift creates a unique window for buyers looking for a more relaxed and less competitive purchasing environment.
Financed Buyers' Advantage: A Window of Opportunity
In the current climate, financed buyers find themselves in a favorable position. The cooling market has resulted in an 8.2% decrease in the average price per square foot in just the past month, providing these buyers with a golden opportunity to secure their dream homes.
Federal Reserve's Stance: Holding Steady in Uncertain Waters
The Federal Reserve's current stance suggests a willingness to maintain these higher rates for a longer duration, observing where the market settles. Anticipating a future drop in interest rates, experts predict a surge in pent-up demand, which could subsequently drive prices higher. Savvy buyers, however, might find this lull in demand an opportune time to make a strategic move.
The Best Strategy: Marry the House, Date the Rate
In the current cooling market, the best strategy could be to seize the moment and go ahead and make that purchase. If you fall in love with a house, marry it! Yes, it will be at a higher rate that we have grown to enjoy, but by locking in a property now, buyers position themselves to benefit by leveraging lower demand and less competition. Rates on the other hand come and go, they aren’t something you are married to. The option to refinance down the line offers a chance to secure a lower interest rate when the right one presents itself.
The real estate market is a dynamic ecosystem influenced by a myriad of factors. In the current landscape of higher interest rates, strategic buyers may find a unique advantage in the temporary cooling of the market. By understanding these dynamics, individuals can make informed decisions to navigate the waves and secure their real estate goals.