The mixed bag that keeps buyers wondering and homeowners staying put

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Published Date 3/27/2023

How is it possible for the Feds to hike interest rates and then see mortgage rates go down? Truth is often stranger than fiction.

According to Realtor.com’s Andrea Ruquier, for the week ending March 23, the nationwide average for the popular 30-year fixed-rate mortgage tumbled to its lowest level in more than a month. “It’s a small reprieve and much-needed break for homebuyers, but don’t look for it to last,” says Riquier. “When the Fed raises rates, mortgage rates usually rise in kind.”

Realtor’s economic data manager, Sabrina Speinau, adds “Economic conditions will keep upward pressure on rates.This “will continue to present an affordability challenge for buyers and may keep some sellers, who are locked in at lower rates, waiting on the sidelines.”

While home prices are still inching up, they’re starting to level off even if prices are higher than this same week a year ago. “This remains the lowest sales-price growth rate since June 2020,” explains Speianu. Plus, interest rates “are expected to remain elevated in the near term, which implies that home prices may continue to soften this spring season.”

Think of it this way — just because sellers hope to get the prices they are asking doesn’t mean it will happen. “While that ideal hovered at a lofty $415,000 in February, the actual sales price of homes—in other words, what buyers and sellers agree on after haggling—can be much lower,” says Riquier. “And according to the National Association of Realtors, that price has declined by 0.2% annually, marking the first such drop in 11 long years.

Thing is, home sellers are staying put or turning their homes into rentals during all this. “Tapering home prices will come as welcome news to buyers, but sellers are understandably displeased—and it shows in the dwindling number of new listings,” she says.

It may not come as a surprise, then, that the number of homes for sale is at half pre-pandemic levels. There are actually more homes available for sale out there right now than in 2022. In fact, total housing inventory (of listings both new and old) is up 59% compared to a year earlier. Many of these are listings that have been languishing on the market, spending an average of 18 days longer than a year ago.

As the weather warms, hope springs eternal that homebuyers and sellers alike will emerge from hibernation. Riquier reminds us that the optimum time to sell for 2023 is the third week in April, when listings are slated to receive 16% more views than usual and fetch $8,400 more per sale. The seasonal pick up is still alive and well, but all that said, this rosy outlook hinges on what mortgage rates do next.

Realtor, TBWS

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