August 15, 2023
What a strange real estate market. To our knowledge, never in our history have we had a situation in which the real estate market has slowed down only because there are not enough homes for sale. Typically, a slowdown in the real estate market is caused by a lack of demand; however, today we have plenty of buyers, just not enough homes. The higher interest rates we see today would usually suppress demand. Today’s high rates have caused somewhat of a pause in demand, but not enough to account for the dearth of listings.
The result of this unique market? For one, home prices are steady, or increasing slightly despite the slowdown in sales. Secondly, new home sales are flourishing because of the lack of existing homes for sale. All of this leads to the next question – where does the real estate market go from here? The future direction of interest rates will be one barometer of the future. We have gotten some good inflation news recently and another set of inflation reports are being released this week. If mortgage rates come down a bit as inflation abates, more existing homeowners may be inclined to list their homes. Mind you, we are not expecting rates to fall back to their lows of the pandemic. But rates that low will not be necessary to get potential sellers to act.
Life moves on. Baby boomers may be aging in place, but the oldest baby boomers are approaching 80 years old and that means their homes are coming onto the market. Remote work is enabling some who are younger to move into their retirement homes before retirement. Millennials who purchased starter homes are growing their families. Life moves on and so will homeownership. One thing for certain, even with more listings, there is a shortage of homes today and this will cause demand to be strong for the foreseeable future.
Source: Origination Pro