Stuck

We’ve all heard the saying, “what goes up must come down.” People can apply that to many areas of life, including real estate. As common of a saying as it might be, that doesn’t necessarily mean it’s 100% true. While mortgage rates are currently up from where they were this time last year (and especially up from where they were two years ago), there’s a commonly held hope that they’ll eventually bottom out again. This belief is causing a sticking point in today’s real estate market. 

Senior vice president of research at John Burns Research and Consulting, Devyn Bachman, says that, “Things are moving, but they’re moving very slowly and ineffectually because of how high mortgage rates still are.” This is causing a gridlock… much like a car that’s stuck in the mud. It’s not sinking, but it’s also not moving. 

State of the Market 

New-construction is faring moderately better than other listing types because oftentimes builders can buy down mortgage rates for buyers. This is appealing to those who are less than pleased by today’s mortgage interest rates hovering near 7%. Builders can only work so fast, though, and they can’t keep up with the overall demand for houses on the market. 

It is still actively a seller’s market as there are more buyers than homes. Bidding wars are still happening all over the country. People are not wanting to give up refinance rates of 2 or 3 percent, so they’re holding off on listing homes. This has caused a nearly 18% drop in overall home sales for 2023. 

So what now? 

Experts are saying that the market won’t really rebound or recover until the Federal Reserve drops rates. Historically, interest rates have been used to help direct the health of the economy. In an attempt to curb inflation, the Fed raised rates last year. Bachman predicts that the market will be the healthiest when it can return to what she calls the “magic” mid-5 range. Perhaps we’ll see that sometime in 2024!