These are turning out to be rather dark days for homebuyers, who are being stretched to break between rising mortgage rates on one end and rising home prices on the other.
The pain is real—but a home loan alone isn’t the whole picture.
We looked at real estate statistics for the week ending Sept. 17 in the latest installment of our “How’s the Housing Market This Week?” column. They suggest that buyers who brave the market today may find some surprisingly favorable conditions that could actually offset some of their financing woes.
Here’s where those upsides are hiding, so that both homebuyers and sellers can stay on top of today’s remarkably fast-changing market.
How the Fed sent mortgage rates soaring
Many homebuyers likely winced on Wednesday upon hearing that the Federal Reserve yet again boosted its short-term interest rates by three-quarters of a percentage point—a move that’s pushing mortgage rates through the roof. And the already high rates are just going to get higher.
According to Freddie Mac, for the week ending Sept. 22, the average 30-year fixed mortgage rate increased to 6.29%, up from the previous week’s 6.02%, which was already the highest level seen since 2008.
“There is no doubt that the increasing mortgage rate will make homebuying even more challenging,” notes Realtor.com economist Jiayi Xu in her analysis. Nevertheless, she adds, “buyers may still find opportunities, as these changes coincide with the time of the year when buyers have historically found the best market conditions to obtain more bargaining power.”
Will rising mortgage rates drive down home prices?
With high interest rates eating into buyers’ borrowing power, the hope is that home prices will settle down a bit to make up for it. Yet whether that will happen remains to be seen.
In August, home prices hovered at a national median of $435,000. And prices are still rising—by 13.1% for the week ending Sept. 17 compared with this same week last year.
While that’s the 40th straight week of double-digit growth year over year, “the general trend for home price growth is cooler, with the rate noticeably lower than what we saw between March and August,” says Xu.
Plus, home prices tend to dip seasonally as we slide towards the holidays.
“Home prices typically decline as we move into the second half of the year, one of the key seasonal trends that help make fall the best time to buy a home, particularly for first-time buyers,” says Xu.
In fact, this year’s data suggests that the very best week to buy is Sept 25–Oct. 1—that’s when national median list prices are slated to drop $20,000 below June’s all-time high of $450,000.
Will home sellers still be willing to list?
Another question right now is whether home sellers are willing to lower their expectations—and prices—to meet poor homebuyers halfway. So far, prospective sellers seem skittish.
For the week ending Sept. 17, the number of new listings on the market dropped by 10% compared to this same week last year. That’s the 11th straight week of year-over-year declines, and another double-digit drop at that.
“Sellers are less optimistic about conditions compared to a year ago,” says Xu.
However, overall housing inventory—a combination of fresh listings and oldies still on the market—is up by 28% over last year. Many have grown so stale, sellers are slashing their prices.
“Although the number of newly listed options was smaller last week, today’s shoppers have more than five homes to consider for every four they had at this time a year ago,” says Xu. “Shoppers have more options than they’ve had in a long time. On top of this, we’re approaching fall, which is typically the annual seasonal high mark for active inventory.”
How much time do homebuyers have?
While homebuyers typically have just 34 days to make an offer before a listing gets snapped up, the mad rush to buy is slowing down.
For the week ending Sept. 17, properties spent six extra days on the market compared to a year earlier. That’s the eighth straight week of homes lingering longer than last year.
This bodes well for homebuyers who stick to their guns, get their ducks in a row, and are fully spring-loaded to pounce on the right property.
As Xu explains, today’s market “will favor persistent and informed buyers who are ready to purchase.”