The real estate market has gone in ways nobody expected it to with attributes affected by multiple factors including the COVID-19 pandemic which cascades down through the supply chain in addition to record low interest rates for mortgages in the US. Would any normalization in the production line or increase in the price of homeownership slow down the market?
It’s a balancing act. Currently, mortgage rates bob around 2.9%. With the Mortgage Bankers Association suggesting to raise the rates above 4% in the very near future, this would cause higher mortgage payments per month meaning fewer potential buyers could afford purchasing. In addition, industries like lumber, aluminum, and plastic have reached record highs in prices while the pandemic has severely impacted labor. The cost of new construction has skyrocketed accordingly which hurts the builder’s profits and the consumer’s wallets. With less affordable options for current homeowners to move into, they are less likely to list their home decreasing the inventory even more. The balance comes in as supply and demand with the correct timing. If the market continues to continue on the inflation path, it will overheat. Raising rates is the solution but raising too quickly would completely crush the market leading to another recession. Finding the sweet spot that curves the market back to normalcy but doesn’t completely stop the activity.
It’s a seller’s market. Because of the stars aligning for more buyers to buy, properties are selling faster and at a much higher price than they would’ve even last year. As a potential seller, the data shows the prices rising and the inventory is low. So low that prices can’t crash the CEO Lamacchia Realty, Anthony Lamacchia explains. As more people are interested in buying, the demand stays high. This isn’t to say it’s not a good time to buy either though. While the list prices of houses may be higher, you also have to recall the mortgage rates are lower. Overtime you will pay more but at a lesser amount per month and less excess money due to lower interest.
With this balancing act in play, it is up to us to watch trends and metrics and up to the Fed to adjust rates accordingly and accurately as to not tip the scale too far in either direction. Please reach out to us with any questions you may have about the real estate market and/or how we can help you navigate it.