Watch out for These Factors in Today's Real Estate Market
Whether you are buying or selling your home, there are multiple factors you need to consider. These factors include where you want to live, your motivation behind buying or selling, and who you chose to help you along this journey. In today's market, you need to consider interest rates and inventory.
Mortgage interest rates have been increasing and have reached three-quarters of a percentage point higher than in the start of the year. According to Freddie Mac's most recent survey, rates have risen 4.72% for a 30-year fixed rate mortgage.
The interest rate you secure when purchasing your home affects
your monthly costs and your purchasing power. Purchasing power refers to the amount of home you can purchase with the budget you have available. When rates are on the rise, the price of the home you are able to afford will decrease.
The chart above shows how rising interest rates affect your plan to purchase a $400,000 house with goals of keeping your interest payments between $2,020 and $2,050. Each quarter or a percent increase in interest rate causes a 2.5 percent decrease in the value of the home you can afford.
A real estate market market requires there be a 6-month supply of homes for sale in order for prices to increase with inflation, only. The National Association of Realtors shows that the listing inventory is at a 4.3 month supply which has increased home prices. Over the last 78 months, home prices have increased consistently. This is a trend to watch as we transition into the fall and winter months. If we continue to see an increasing amount of homes for sale, we will be able to move closer to a normal market and further from a seller's market.
To conclude, if you are planning on entering the housing market, either as a buyer or a seller, meet with our PorchLight Real Estate Team to discuss what these trends in interest rates and inventory could mean for you.