For more than 15 years, Georges Ratio has been studying the housing market. He is the Chief Economist and Director of Economic Research at Realtor.com, where he focuses on trends in global economies and real estate markets. He is also a past director of research programs at the National Association of Realtors, where he specializes in housing statistics, international and commercial real estate market performance, and more. (Realtor.com is owned by the same parent company as MarketWatch.)
So we asked Ratio: What do buyers need to know about the real estate market now? (Check out the lowest mortgage rates that you may qualify for here.)
1. Mortgage rates will likely continue to rise
“The increase in monthly mortgage payment rates for a median-priced home pushed $550 higher than last year, a significant increase given that most households are also feeling the pressure of higher prices for food, gasoline, cars and clothing. Equally important, it is expected to continue Rates are on the rise as the Fed tightens the flow of credit,” says Ratio, who predicts that if the pace of increases continues, we could soon see a 6% rate on 30-year loans.
2. Not enough homes for sale – making your options limited
One thing to keep in mind is that the inventory is still limited because the number of homes for sale is still lower than last year when buyers were fiercely competitive. “The main reason for this shortage is the fact that construction companies have not kept pace with the pace of construction with population and household growth over the past decade,” says Ratio. In fact, there are nearly 6 million homes short, according to research from Realtor.com, and this makes it difficult to find enough homes for all buyers looking for a property.
3. Home prices will likely continue to rise in many markets, but not nearly as fast
Ratiu predicts that prices will continue to rise also due to the fact that there are still more buyers than homes for sale. “In many markets across the country, buyers are discovering that there may still be someone else with a higher cash offer or down payment, perhaps to be outbid,” Ratiu says.
But due to sharp increases in interest rates and inflation, he says, we are approaching the top of the price growth curve. “In some markets, sellers are finding that buyers are starting to spend more time searching and are less willing to compromise on contingencies, insisting on home inspections and asking homeowners to fix property deficiencies,” Ratio says. What’s more, he says, in about a dozen cities across the country, prices have fallen over the past few months, an indication that the market is beginning to return toward more equilibrium.
We can expect prices to continue rising in the coming months. For consumers, the bottom line is that higher expenses leave less money in their pockets at the end of each month, just as rents and home prices continue to rise at double-digit rates,” says Ratio.
4. Sellers will still have an advantagebut it wouldn’t be too severe
Sellers are likely to retain control in most markets across the country. However, its advantage is starting to wane due to the combination of high prices and high interest rates – which keep millions of buyers out of the market. Ratiu says the slowdown in demand is noticeable as sales of both new and existing homes have fallen over the past two months. Twenty percent of homeowners indicated that they plan to go ahead with plans to delay the spread of the pandemic this year and list their properties for sale. An increase in supply will lead to more competition between sellers, shifting the market more towards buyers,” says Ratio.
5. Don’t let FOMO go down You’re in a house you don’t like
The main benefit for buyers this year is that housing markets are already in a marked transition from the frenetic pace of 2021. With financial and economic pressures mounting, Ratio says it’s important not to let the fear of missing out lead you to rush into what is the biggest purchase most people’s lives do. “The pace of new construction is increasing, more homeowners will be willing to list their homes, and with interest rates rising, prices are already beginning to adjust to the slowdown in demand. Patience is generally seen as a virtue and may also be a key component of a home search this year. “.