Interest Rates Juicing the Market

Blog Post Image
Real Estate

For buyers waiting for the market to slow and turn more favorably towards the home shopper, there seems to be no light at the end of the tunnel. Many thought that the pandemic would slow housing, create a deep recession, and erode home values, giving buyers that much desired edge. Instead, rates plummeted to record lows, demand escalated, the inventory of homes available plummeted to unfathomable depths, and home values soared to unbelievable heights. The pandemic led economic recession lasted only two months, and it did not touch the housing industry. Values have climbed more than 20% year-over-year and the pace of Orange County housing has not slowed much at all this year. The Expected Market Time (the amount of time between hammering in the FOR-SALE sign and opening escrow) is currently at 23 days (I’ve been seeing it under 5 days!), an unbelievably Hot Seller’s Market. At this point, what will decelerate the market enough to allow housing to transition away from a Hot Seller’s Market to a Slight Seller’s Market, Balanced Market, or even a Buyer’s Market? Rising mortgage rates. When rates rise, many buyers turn their collective noses away from pursuing a home because monthly mortgage payments rise, and affordability diminishes. As a result, the inventory rises with fewer buyers in the marketplace, and the Expected Market Time rises as well. This year there really has been no relief in the relentless pace of real estate due to the historically low mortgage rate environment. According to Freddie Mac’s Primary Mortgage Market Survey®, mortgage rates have risen to 3.14% the highest level since March. Yes, rates have risen from there, but keep in mind that prior to the pandemic, today’s 3.14% rate would be an all-time low. Rates would need to climb to 4% for the market to slow from an insanely Hot Seller’s Market to just a Hot Seller’s Market with market times closer to 60-days. Very few economists project rates to climb above 4%. That is what it would take for the market to move more towards a Buyer’s Market. The light at the end of the tunnel with a shift in the market will not occur until mortgage rates rise substantially. Freddie Mac forecasted a couple of weeks ago that mortgage rates will rise to 3.5% in a year from now. That is not quite enough to slow housing meaningfully. Either rates eventually climb to slow housing, or values will climb to the point that they soften demand. The Orange County housing market is just not there yet. 

I am not one to brag about my success but I love bragging about what do for my clients! Providing them with the best scenario not only to sell/buy but make it work to meet their goals and timelines.

Everyone has either experienced first-hand or heard from a friend that the real estate market is challenging for buyers due to limited inventory. To get an offer accepted in a low inventory market takes more than just a non-contingent, 20% down over asking price offer; that’s just the beginning! Sellers want to take advantage of the high sales prices and sell but in the majority of cases, they would have to find temporary living until they find a new home.  

Offers I make on behalf of my clients and negotiations when representing sellers require creative strategies – the results this year so far show.

  • Average amount of offers it took to get a buyer an offer accepted: 2 offers
  • Average days it took for a seller to sell their home: 5
  • Average amount over asking price: $63k
  • Average length of free rent back providing time to buy a new home: 2.5 days
  • Average amount of listings sold over list price: 99%

89% of my business is based on referrals and repeat clients, therefore, thank you to my clients and friends for your business in 2021. Please keep me in mind the next time you have a friend or family member looking to make a move.