As we’ve written about plenty in our Trending Topics section, home prices have increased rapidly since the beginning of the COVID-19 pandemic.
However, we’ve more recently seen some signs of the market cooling down due to record-level inflation and mortgage rates that have settled in around 5 percent, which is up significantly from 2020 and 2021.
What do those rising mortgage rates truly mean for home buyers? The Forbes article below notes that the average buyer’s monthly payment is up 39 percent year over year. This is the largest increase on record.
The article goes on to highlight a few other signs of a cooling market, such as fewer Google searches for “homes for sale.” Prices haven’t really come down yet, however, since the ratio of buyers to sellers remains pretty much the same — and sellers are still in a pretty good position to capitalize on the larger pool of potential buyers.
But with monthly home payments becoming so much more expensive on average, we may start to see the pool of potential buyers shrink, which would change the dynamics of the market. If more people are looking to sell than buy, prices should start to lower as buyers gain more leverage. And if that happens, sellers may pump the brakes too, at least until selling conditions become more favorable. I wrote before about the market “normalizing,” and that’s what is starting to happen. Real estate always works in ebbs and flows.
Mobility professionals who manage corporate home sale programs should be prepared to shift quickly as this all plays out, ensuring that relocating employees who list their properties have the support they need — particularly in an environment where it may not be as easy to sell.
“Rising mortgage rates are taking a bite out of pending sales as both buyers and sellers take a step back from the turbulent market,” said Daryl Fairweather, Redfin’s chief economist. “It seems as though the ratio of buyers to sellers remains mostly the same, which is why we have yet to see a substantial drop in bidding wars or the share of homes selling quickly. It's still early days though when it comes to 5% mortgage rates. The number of buyers willing to pay such high mortgage payments could evaporate by late summer.”