If you are in the market to purchase a home, or are considering selling yours, you may have noticed slight shifts taking place on both ends. Here is a breakdown of what we are seeing lately:
1. Rise in Inventory and Interest Rates. Here in San Diego County we have seen a substantial rise in inventory over the last month or so. According to Altos Research, inventory has climbed 4.5% this week across the US. This could be due in part to timing in this busy Spring selling season, or could be related to the recent interest rate increase – which last week was about 3.6% for a 30 year fixed rate. Many buyers took advantage of low interest rates in the last few years as inventory was tight, and now those who may have opted to wait for price and/or inventory market changes will have higher rates. This could lower the affordability bar for some buyers, shrinking buyer pools, which could lead to price reductions and longer market time.
2. Price Reductions and Back on Market Properties: There have definitely been more properties with price reductions and properties falling out of escrow as well. These are strong signs of a shifting market, and can be good news for buyers. Once a home falls out of escrow it may not get as high an offer the second time around if there is more inventory available and homes are spending more time on the market.
3. Home Prices are Still Rising, but Not as Quickly: We are still seeing home prices heading upwards, but the prices do not seem to be rising as quickly as they did in 2021. According to a Zillow study, the typical home is worth 20.6% more than it was a year ago.
4. Rent Growth has Slowed Down: Rental price increases have slowed for the first time in over a year, according to the aforementioned Zillow study, having grown less than 1% from February of this year. This may be welcome news to buyers who get priced out of desired markets, but it is important to keep in mind the rent vs. buy dilemma and the associated pros and cons that apply to each individual situation.
All in all the shifts in the market could be good news for buyers in time, so long as the interest rate increases do not prevent them from obtaining comfortable monthly mortgage payments. Sellers who need to sell may want to consider doing so now, while the market is still doing well and prices continue to rise, albeit not as fast as we have seen in the last year. It is still a seller’s market however, so waiting longer to buy could be a double-edged sword for buyers with rising interest rates.