Will 8% interest rates bring down home prices?

For home prices to adjust, we need an imbalance of supply versus demand, and this market is surprisingly balanced, but we may be starting to see that tide turning with mortgage interest rates hitting 8%.  When mortgage rates go up, we lose more homebuyers who aren’t able to qualify or are concerned about their ability to commit to the payment long term. Since the bottom of 2021 when rates were the lowest, over 60% of potential home buyers in America cannot afford to buy a home in our current market. As rates continue to go up, the buyer pool shrinks. Last year was the craziest market we’ve experienced in a long time but we’ve watched the market diminish as rates continue to do the unthinkable.  As we began 2023, rates at 6% appeared to be stable - nothing gangbusters, but now we have to focus on the weekly data more than ever because it’s been 23 years since we’ve experienced 8% rates.  Does that cause a pause in the market? It’s anyone's guess.

The reality is that it’s not just mortgage rates that are the driving force. We just came off of 40% price increases in a very short amount of time. The pandemic started the craziness.  We have to look at the total housing costs that matter and the one variable is price. When we see increases in inventory (homes for sale) and days on market (homes taking longer to sell), it will become clear that demand has fallen because of the market conditions.  Up until very recently, prices continued to make conservative increases every month because of the continued demand; however, the question remains… Will 8% interest rates bring down home prices?  These are uncharted waters.


Will our market continue to see “seasonality changes”

The volatility of rates will have a larger impact than the change in seasons. Buyers who can’t or didn’t buy when rates were lower are watching for rates to come back down. There are so many variables that predictions of ‘what’s to come’ are practically impossible. I watch the data every day because that’s what determines where we’re headed. Economic reports, retail sales, home builder sentiment, mortgage applications, housing starts, jobless claims, canceled sales… is your head spinning yet?


No predictions – Just the facts

For those watching the market, weekly stats will become critical because monthly data is simply too old.  Markets can change on a dime. By the time the monthly statistics are reported, it’s a new day. When mortgage interest rates go from 7% to 8% in such a short time, it tends to send a wave of uncertainty through the market.  Here are the stats for this week in the four-county region… Pended sales are down 22% from the previous week.  Closed sales are down 44%.  Some may say that it’s the time of year, so let’s compare sales this year to last… Pended sales for this same time are 18% fewer and closed sales are 33% fewer than 2022.

I’ve stopped asking “what next” so instead I’ll just be sharing the weekly data of home sales - available homes for sale, pended sales and closed sales numbers. There are still sales happening every week.  No predictions.  No negativity.  Just the FACTS.

FOUR COUNTY REGION - WEEKLY REPORT

SACRAMENTO COUNTY - WEEKLY REPORT

We're here to help you, no matter what the market is doing.

Every day is a gift

So as I sat down to write this month’s blog, I struggled a little deciding what to talk about.  There’s a lot going on in the market now with interest rates approaching 8%.  With high interest rates comes a challenging market for buyers. For sellers who want to make a move into a more appropriate home, their obvious concern is about finding a replacement property with so few homes on the market.  Every situation is different but through it all… we are grateful for every opportunity to help those who do want (or need) to buy and sell.  That’s why I continue to remind myself that every day is a gift!


How’s the market??

Surprisingly, or maybe I shouldn’t be too surprised, home values continue to increase.  Not because we’re in what would be considered a ‘normal market’, but because the supply of homes is so sparse.  People are still needing to purchase housing and don’t seem to be too phased by the cost.  I may be a little tainted because I remember not that long ago when a normal house payment for a first-time buyer was around $2,000; today it’s almost double that, but rents are high so the benefits of homeownership outweigh the cost.

I’m not one who likes to make predictions because those who do, many times are wrong.  I will say that I’m keeping a close (daily) eye on the real estate market. From what I’m seeing right now, I don’t expect interest rates to come down anytime soon.  If anything, they’re expected to take one more tick up before the end of the year - although there’s a lot of people pleading with the Feds to stop.

Here’s a look at this month’s sales activity in the four-county region.  Notice that there are still a lot of sales!!  September closings were 1,438 - down 23% from this same time last year; however if you look at how many homes buyers had to choose from, we have 34% fewer homes on the market than at this same time last year.  The question is this - If we had more homes on the market, would we have more sales??  Maybe our market isn’t struggling because of the cost of money.  Maybe it’s struggling because sellers aren’t selling!!  Just a thought…



Whatever the market conditions are, we’re here to help you and those you know who are thinking or needing to buy and sell real estate.  We consider it a privilege to be of service to you, your friends and family!  As we approach the holiday season, we want to wish you nothing but the best and appreciate all that you do for us.  Don’t forget… Every day is a gift.