If you’re someone who’s interested in making a real estate transaction, chances are you’ve heard the terms “buyer’s market” and “seller’s market.” The former, of course, means conditions are favorable for purchasing a piece of property, while the latter means the opposite.
It’s been a seller’s market in the housing sector for quite some time now, but as we enter the second half of 2022, there are signs that the tide is starting to turn. GOBankingRates, Scotsman Guide, the Mortgage Bankers Association, and other industry websites and publications are all pointing to several indications that more favorable conditions for buyers are on the horizon, and in fact may have arrived already.
But aren’t mortgage interest rates still relatively high?
In general, mortgage rates are certainly higher than the all-time lows they reached throughout much of the pandemic. But as always, these rates fluctuate daily and sometimes hourly, and they can move downward at any time. For example, during the week heading into the 4th of July holiday this year, The Wall Street Journal reported that mortgage rates recorded their largest week-to-week decline since 2008. From July 5-8, rates ticked back up again.
It behooves borrowers to get a low rate on a home loan, which begs another question: how can there be a buyer’s market when rates are higher overall? It’s possible when those rates initiate a few factors that are also signs that a seller’s market could be ending.
- Fewer mortgage applications.
The Mortgage Bankers Association recently reported that based on June 10, 2022 statistics, mortgage applications for purchases were down 16% from last year (their lowest level since the turn of the century, according to GOBankingRates). Fewer people applying for mortgages, possibly because they feel priced out of the market, means less competition for those who are in a position to buy a home and want or need a loan to do so.
- More housing inventory.
Not everyone is willing or able to pay cash for something as pricey as a home, so fewer mortgage applications generally mean fewer people are buying property. Therefore, more homes are available for purchase. The June 2022 Monthly Housing Market Trends Report published by Realtor.com indicated that the inventory of homes for sale increased again during that month, the largest increase in the data’s history, with active national listings rising by 18.7% over last year.
- Home price reductions.
More homes on the market means more competition among sellers, so they have to be more flexible with their pricing in order to close a deal. With affordability hovering around all-time lows and buyer activity on the decline, more home sellers are adjusting their expectations and their asking prices, according to a Redfin report cited by Scotsman Guide. The median asking price of newly listed homes for sale dropped by 1.5% from this past spring’s record peak, the report stated, and Scotsman Guide reported that home price growth saw its largest monthly decline in 16 years in May 2022.
Are these merely blips on the radar, or is a buyer’s market is imminent, if not already here?
Only time will tell, but if you are considering making a purchase in the near future, these mortgage best practices still apply:
- Get your ducks in a row before you apply for a loan.
- Get pre-approved for financing.
- Consider options like a rate lock, a temporary buydown, and TBD underwriting to help you get a great rate and make the strongest possible offer when you find the home you want to buy.
Your local Homeowners Licensed Mortgage Professional is always available to advise you on the current rate environment and help you with your home purchase. Start a conversation today and take advantage of what could be becoming a buyer’s market!