Real Estate Rundown October 2023
October 01, 2023
Photo credit Scott Web Via Unsplash
Sellers Are Cutting Prices
A recent Redfin research report has highlighted that despite high demand in the real estate market due to limited housing inventory, financial challenges faced by buyers are leading to home sellers reducing their prices to close deals. During the four weeks ending on September 24, 6.5% of homes for sale in the U.S. saw price cuts, up from 5.8% in the previous month. Some markets, such as Wenatchee-East Wenatchee, Idaho Falls, and Carson City, have experienced over 50% of listings with price cuts.
Despite a general upward trend in home prices, with the median U.S. home sale price rising 3% year over year, reaching $420,846 in August, the high cost of financing, driven by mortgage rates above 7%, is making buyers more price-sensitive. The average monthly payment for a 30-year fixed-rate loan hit a record high in July, reaching $2,306, pushing many buyers toward the $3,000 mark when factoring in taxes and insurance.
Mortgage Rates Reach 23 Year High
Freddie Mac's latest Primary Mortgage Market Survey reveals that as of September 28, the 30-year fixed-rate mortgage (FRM) has reached a high of 7.31 percent. According to Freddie Mac's Cheif economist Sam Khater "The 30-year fixed-rate mortgage has hit the highest level since the year 2000". This surge in mortgage rates is accompanied by rising house prices, a departure from the situation at the turn of the millennium. The current scenario is attributed to low housing inventory, creating challenges for both buyers and sellers who are waiting for more favorable conditions. Compared to a year ago, when the 30-year FRM averaged 6.70 percent, the increase in rates is notable
Fall Housing Prices Expected to Cool Down
The cooling trend in the housing market is accelerating this fall, resulting in a shift of negotiating power from sellers to buyers. Sellers are increasingly reducing their list prices. Zillow reports 9.2% of listings experiencing price cuts in the week ending September 16, the highest since November of the previous year. The primary reason for this cooling market is higher mortgage interest rates, with 30-year fixed rates consistently above 7% for six weeks, making home buying less affordable for many. However, the recent increase in new listings has eased the supply shortage, offering more options for buyers. For those with the budget to accommodate higher rates, this fall presents a favorable opportunity, with motivated sellers and reduced competition. Sellers, on the other hand, may find less favorable conditions compared to the previous summer.
Pending Homes Sales Fall
Pending home sales in the U.S. declined sharply in August, dropping by 7.1%, with all four regions of the country experiencing monthly losses and year-over-year declines in transactions, according to data from the National Association of Realtors (NAR). This downturn is largely attributed to rising mortgage rates, which have exceeded 7% since August, reducing the pool of potential homebuyers. Lawrence Yun, NAR Chief Economist, stated that buyers are reevaluating their expectations due to these higher rates. While the flow of new listings saw a modest improvement, inventory remains low. The decline in home sales is expected to continue through the fall, with higher mortgage rates being a significant factor. However, for buyers with budget flexibility, the fall may present a favorable opportunity with motivated sellers and reduced competition.
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