After a period of stability and growth, the real estate market will inevitably go through slowdowns and slumps. This October, mortgage rates are on the rise, some of the biggest in years. Signs of a possible slump are evident: rising inventory and dropping prices of new listings. Home prices are also going down, while immediate sales are becoming infrequent.
But as we already know by now, most slowdowns in the housing market are seasonal. Prices tend to drop at certain times and their buying and selling activities move at a snail's pace during winter. However, if there are drastic shifts in the market, the slump may go beyond seasonal.
So how long will this housing market volatility last and how soon should things return to normal? Here are some points to consider:
Rising mortgage interest rates can affect buyer decisions. When there are surges in mortgage rates, buyers pull back and inventory increases as a result. Rates were volatile in the last few months. Around that period, buyers were more engaged and active in the property market. The change was evident because inventory did not move for a while.
Whenever mortgage rates skyrocket above 5.5%, buyers become less engaged. Presently, inventory and home price reductions are moving and no longer stagnant. Real estate stakeholders should take the 5.5% threshold more seriously if they want better market outcomes in 2023. Once mortgage rates drop, we may see a stable demand and more buying, selling and investing activities.
Inventory was expected to grow mid-October provided buyers were active and engaged in the housing market. However, if they continue to be passive, then we may not see any inventory growth until November, which is odd given the fact that holidays are always a quiet time in real estate. Sellers usually wait to list their homes after the New Year and are not likely to be active around Thanksgiving and Christmas.
If you are willing to take the risk, you may chance upon a few good listings during the holidays in November or December. Some sellers have their reasons for listing their property at such times, so inventory increase is still likely. In the event inventory grows during the holidays, then it is a great sign for future home prices.
Indeed, demand for quality and sustainable homes remains solid, and will continue to do so until next year. Though demand was solid in certain quarters, some markets continue to struggle and get back on track. These markets were the ones hardest hit during the pandemic and are currently on the road to recovery. The past two years saw slump after slump, while bigger, more stable markets managed to hold their ground amidst Covid-19 worries.
How some of these markets will weather the storm remains to be seen. High mortgage rates are an added setback, but property experts are closely monitoring data.
Market volatility is real and, on occasion, occurs when one least expects it. Buyers, sellers and investors should always have a back up plan in case things do not go their way. Consult a buyer's agents in Canberra to help you gear up for market volatility and be informed before making any major decision.
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