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
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