Is market sanity on the horizon at last?

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Published Date 5/1/2023

Some things don’t add up — like interest rates creeping up when there are signs that the economy might be slowing. Realtor.com’s Andrea Riquier admits that these rising rates, combined with higher home prices, have taken a toll on homebuyers’ budgets, with the cost of financing a typical house costing $611 more per month than it did a year ago.

Yet many experts are beginning to predict the beginning of the end as home prices and inflation continue to cool. “With the rate of inflation decelerating, rates should gently decline over the course of 2023,” predicts Sam Khater, chief economist of Freddie Mac. “The prospect of lower mortgage rates for the remainder of the year should be welcome news to borrowers who are looking to purchase a home.”

Riquier reports that in addition to the prospect of lower mortgage rates, home prices—currently hovering at $424,000 in March—might also soon be on the wane. For the week ending April 22, listing prices were just 2.4% higher than a year ago. That’s the slowest growth rate we’ve seen since May 2020. “Plus, listing prices are simply what home sellers hope to get, and cash-strapped buyers these days are driving a harder bargain than ever,” she says.

Realtor.com Chief Economist Danielle Hale agrees: “Even though potential sellers are still listing homes at higher prices, they aren’t necessarily getting what they’re asking for,” she says in her weekly analysis. This is bolstered by the fact that the national median sale price of homes that actually reached the closing table declined on a yearly basis for the second straight month in March, according to the National Association of Realtors — although it was almost entirely driven entirely by declines in the West,” where prices have grown so much that many homebuyers set their sights elsewhere.

Time to sell? Until mortgage rates start falling, homeowners who are thinking of selling seem to be stuck. “We are not seeing as many new home sellers as one year ago,” says Hale, who admits home sellers feel trapped by the mortgage rate they have on their property which is easily several percentage points lower than what they’d get now. Even if they wish to pay cash for their next home, what remains for them to buy after selling their homes would be new construction or stale listings at this point.

Now that spring is slowly giving way to summer? A kind of calculated hope abounds that the home-buying season is bound to pick up. “We expect to see a growing number of home sellers, consistent with typical seasonal trends,” Hale predicts. And as supply expands, this translates into “better opportunities for buyers.”

Realtor, TBWS

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