Interest rates are on the rise and the market is starting to show signs of fatigue as we come nearer to closing out 2022. At the beginning of this year, we witnessed a continuation of our 2020-2021 COVID market and now that interest rates are in the 7% range, we’re starting to see signs that the market is slowing down. What has been non-stop rapid growth for the last few years has slowed to finally give buyers some room to breathe.
But, how to buyers make sense of purchasing a home at 6 or 7% interest rates when rates were just 3% 10 months ago? It’s a hard pill to swallow for those that have been holding out for the market to slow down, and unfortunately it doesn’t look like it’s going to get much better by the end of the year. In fact, our models indicate that interest rates are likely to increase another 1.25% before the end of the year making a typical mortgage 8% interest, a number we haven’t seen for decades.
Higher interest rates however don’t always mean that home prices are going to become stagnant or plummet. Instead, the market is controlled by typical supply and demand and it’s more likely that listing numbers drop as rates increase. The reason for this is many homeowners choose to sell their homes to either upsize or downsize, but neither of these reasons are what’s called a necessity move. Necessity moves are things like job relocations and divorces and typically this makes up about 15% of listings on the market. The other 85% is made up of sellers choosing to sell, which is less likely when interest rates are in the 7% range.
Remember, many homeowners are enjoying 2-3% interest rates right now, so trading this rate for a 7-8% rate isn’t nearly as appealing, and it doesn’t make sense to sell their homes unless they absolutely have too. So, if listing numbers drop and there is limited supply then the demand increases even if there is already a limited demand due to rising rates.
Unfortunately, rising interest rates and a decreased buyer demand means that rents are likely to increase making things even tougher for those looking for an affordable place to call home.
I’ve spoken with many buyers recently that have pulled out of the market because of rising rates and fear of market uncertainty. As much as I understand being cautious, renting is like having a 100% interest rate as you gain no financial value.
I can’t predict what’s going to happen in the market in the coming months, but I can without a doubt say that I’ll be here to help those that need it. If you have questions, concerns, or just want to discuss the market I’m here to help you.
If you’re considering buying or a selling a home in the Waxhaw area and would like to learn more about the process, please don’t hesitate to call me at Briggs American Homes at (980) 250-2795. I would love to help you and your family with all of your real estate needs!
Check out my latest client testimonial! “We are so fortunate to have worked with Matt Lawson! He has been an invaluable resource throughout the entire process of buying our home. Right from the start, we got a good feeling about him. He could relate to our needs and really helped us bring our options into focus, saving us valuable time and energy. He not only has years of experience as a realtor. He has worked as a home inspector, published numerous articles to help inform prospective buyers… I can’t say enough. We found the right realtor. And the right house!” L. Berger
Matt Lawson, MBA is the Owner and Broker in Charge of Briggs American Homes, a real estate team at REAL Broker, LLC. Matt lives and operates his business right here in Waxhaw, NC and is passionate about all things Real Estate.