The housing market frenzy of the past couple of years is over!!

We all knew the insane housing market conditions that have existed since Covid couldn’t continue forever, and if you’re a regular reader of this blog, or have seen any of the videos we’ve put out over the past couple of months, then you’ll know that we’ve been talking about a housing market shift for some time now.

The shift is happening right before our eyes, but that doesn’t mean the sky is falling and certainly doesn’t mean a crash is imminent.

So what does it mean if you’ve been planning on buying or selling a home and what do the experts believe the rest of the year has in store for us?

Watch the following video, or continue reading below, to learn more.

Without a doubt, changes in the real estate market are making people nervous. Buyers have seen home prices soar and rising mortgage rates are putting extra pressure on household budgets already being stretched by 40-year high inflation.

Should you wait and see what happens? Should you move forward with plans to buy if you still can?

These are common questions buyers are asking themselves right now.

Sellers who have been wanting to sell but hoping to time the market are feeling like they’ve missed their opportunity. Price cuts are increasing and homes are staying on the market longer than they were just a couple of months ago.

To be clear, you haven’t missed the market and prices are not declining, but if you’re expecting to list your home Friday, have a carousel of showings over the weekend, and review offers Monday, that probably isn’t going to happen.

Optimistic sellers who priced their homes ahead of the market are the ones having to make price reductions. As competition rises, the homes that show the best are the ones that will sell first for the highest possible price. Buyers are increasingly unwilling and unable, to offer way above the list price just to win the bidding war.

Here is what the experts have to say about inventory (supply), mortgage rates, and home prices going forward.

Inventory Will Continue to Grow

Housing inventory has risen rapidly over the past couple of weeks and is likely to continue growing. We are experiencing year-over-year inventory growth for the first time since 2019.

However, we need to keep in mind that inventory still lags well below pre-pandemic levels. While the number of homes for sale in Frisco has grown 29% over the past 2 weeks, we still have 400% fewer homes for sale now than we had the first week of June 2019.

Here’s what rising inventory means for you

As a buyer - having more homes for sale will be welcome news and ease the multiple offer situations, but with inventory still low you still need to act relatively quickly and expect to pay at, or above, the list price for most homes. The amount you can expect to pay over is decreasing though.

As a seller - your home will face more competition as more people put their home up for sale, but you can still expect to receive a good price and there is more to choose from if selling your home to buy another one.

Mortgage Rates to Continue Trending Upwards

Even though mortgage rates did decline this past week, the consensus view is that mortgage rates will continue to trend higher in response to inflationary pressure.

The Fed needs to be careful here as cooling the housing market is a necessary step to combat inflation, but too much cooling could lead to a recession.

As a buyer - stay connected with your mortgage professional, or reach out to us if you’d like to be connected to our preferred partner, so you can learn how rising rates impact your purchasing power.

As a seller - rising mortgage rates appear to be motivating some sellers to make a move sooner rather than later. If you’d like to talk about how to best time your move please don’t hesitate to reach out.

Home Prices Expected to Continue to Climb

Even though the market is shifting and rising mortgage rates are impacting buyer demand, the imbalance between supply and demand is expected to keep home prices moving upward but at a slower pace. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR) explains;

“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022…Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”

My personal belief is this will play out differently depending upon where you live. There are several markets that are considered more overvalued than others and therefore susceptible to some price declines. Austin, Boise, Las Vegas, etc. Prices in those markets are likely to remain flat, and/or, decline slightly, but not drop drastically unless something unforeseen happens.

Here is Frisco and Prosper home prices are not expected to decline or remain flat, but continue appreciating at a slower pace. The latest survey I have seen shows an average of 15% cumulative price appreciation over the next 4 to 5 years, but we will see.

As a buyer - if you’re in a market where home prices are expected to continue appreciating, the longer you wait to buy the more it will cost you. As inflation continues to push rents higher, homeownership can act as a hedge against inflation and allow you to build equity in the coming years.

As a seller - price appreciation is continued good news for you, but if planning on selling to buy another home your next home is also getting more expensive. Having a plan to balance the conditions between selling your current home and buying your next one is key. If you need help with that plan give us a call and we’d be happy to discuss the options with you.

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Bottom Line

As a buyer or a seller in a changing market environment, it’s important to understand the latest market conditions so you can make an informed decision. Let’s connect to discuss your goals and objectives so you can determine the best time for you to make a move.