The weather is warming up, the trees are coming back to life, and it almost feels like spring here in Georgia. While the locals will tell me it's way too early, this Florida native can DREAM. However, I’m inclined to believe the housing market agrees with me on an early spring. The weather isn’t the only thing warming up…
As we adjust to interest rates maintaining far north of 3%, buyers that have been waiting to see what the market is going to do and/or for spring are stepping off the sidelines. January pending home sales spiked 8.1 percent. And home showing traffic has significantly ticked up according to ShowingTime’s showing index. The majority of the 25 metro areas analyzed had an average of between four and nine showings per listing, up from a range of two to seven in December.
As the spring market begins, effects of low inventory and affordability will be felt by all. Data from Realtor.com shows inventory is down 47% compared to pre-pandemic housing supply. Low housing inventory is expected to keep housing prices stable because there are more buyers than homes available. In other words, if you’ve been waiting for a significant drop in housing prices, it's highly unlikely to happen. Especially for homes at a price point below $400k - First time home buyers or low-to moderate income buyers are expected to feel this the most because this is the area with the most demand and lowest supply. The good news is if we look at the number of homes for sale last year compared to now, inventory is up 67.8%.
While economists stand by their expectation that mortgage rates will be lower at the end of the year, rates are expected to remain higher until significant progress is made to slow economic activity and reduce inflation. Looking at historical data, interest rates are still low. Between 1971 and 2022, the average rate for a 30-year fixed rate is 7.76%. As I write this, the current rate for a 30-year fixed mortgage is 6.95%. If we look back a few generations, interest rates in the double digits were normal. We were lucky to see interest rates at 3% and we still are with today's interest rates.
If you’re gearing up to buy or sell this spring, here’s what we recommend:
Sellers
Have a pricing strategy that is based on today's market conditions, not last year. Well priced homes will sell quickly and attract multiple offers with today's demand.
A little goes a long way… the more a home looks brand new, the faster it will sell. Whether it's going the extra mile in your spring cleaning or maybe a fresh coat of paint, preparing your home for the market makes a dent in its days on market. Buyers don’t want to feel like the home has been ‘lived in’. A few hundred bucks in repairs can mean thousands more in sales price.
Spring/summer is historically a better time to sell even though there is historically more inventory. It’s a fitting time for families with children in school to move and there is a lull in holidays to prepare for.
Buyers
Have a plan and a team. Know what you want and how you’re going to get there while being realistic. This means selecting a lender, getting pre-approved, and making sure you're comfortable with the ballpark of your home payment. Select a Realtor to work with that you trust and who knows the market. Lastly, think through your priorities - for example, is the location or having a bonus room more important?
Spring season historically brings higher prices, but more selection.
As mentioned earlier, if you’ve been waiting for a significant decrease in home prices, demand is steadily working against you. There is not enough housing inventory to bring the housing market back into equilibrium.
As always, if you can afford to buy a home it's wise to do so. Purchase and sell your home when it's the best time for YOU. Timing the market is impossible - there are too many unpredictable factors at play. The market is always changing and we never know where it will go next. The best thing you can do is make informed decisions that are best for your personal household. If you’d like to talk more about the market or you’re ready to buy/sell contact us here.