In the latter months of 2022, the rise of mortgage rates to 7% drove most buyers to the sidelines. And, it’s understandable why — a 4% difference in mortgage rate, for example, translates into roughly $333 more in monthly mortgage payment per $100K of mortgage. So, for a $500K mortgage, that’s a difference of $1,667 per month.
Across the latter months of 2022, the number of prospective buyers dropped. At the same time, there were still homes being put on the market for a few months by homeowners who had already been planning to sell. During that time, we ended up with fewer buyers than sellers. As a result, the real estate market lost some air. In the fall and winter of 2022, we largely stopped seeing multiple offers, escalation clauses, and all the craziness we saw at earlier points since the pandemic began. Home prices actually dropped noticeably in many areas.
Things have changed of late, though — yet again. Now, we’re facing a situation where very few homeowners want to sell their homes. And, the reason is obvious — they’ve likely got a 3% or less rate on their current mortgage (or, maybe they’ve even already paid off their mortgage). If they sell their current home and buy another, they’ll be trading a 3% or less rate on their current mortgage for a 6% to 7% rate on their new mortgage (the actual rate will literally depend on the day; mortgage rates have been very volatile recently). That’s a huge increase in monthly mortgage payment to take on.
So, right now, there’s a historically low number of houses being listed for sale. It’s striking how few houses have come on the market in the last few months. At the same time, there are still some buyers who just need to or really want to buy — and, these buyers right now aren’t sensitive to current mortgage rates because they typically have a lot of cash to put down, or to make an all cash purchase.
While there aren’t many buyers right now, there are even fewer sellers. Really tight supply with fewer sellers than buyers, many of whom have a lot of cash, has translated into a highly competitive market again — with multiple offers, escalation clauses, and pre-offer home inspections like what we’ve seen at earlier points since the pandemic began.
Long story short, if you’re looking to sell your home — and, if you’re not looking to buy another house — this is a great time to sell. If you’re looking to buy, it’s challenging right now — you’ll need to be aggressive with your offers. And, if you’re looking to invest in real estate, I’d suggest standing down for now, and wait to see how the real estate market evolves in the coming months. For real-time mortgage rates and related news: https://www.larrygiammo.com/mortgage-rates-and-news/.
My Most Recent Real Estate Activity
Things have been busy for me recently (a good busy). Just this week, I have clients settling on two real estate transactions — the sale of 537 Anderson Ave in Rockville (https://www.realtor.com/realestateandhomes-detail/M9631114379) and the purchase of 787 Azalea Dr in Rockville (https://www.realtor.com/realestateandhomes-detail/M6148313949).
And, I’ve just put on the market my newest listing at 10324 Bells Mill Terrace in Potomac (https://www.realtor.com/realestateandhomes-detail/M5564631831). It’s been great helping the sellers prepare their home for sale and to stage it so it’ll show at its best. If you’re thinking of selling your home, I’d be happy to talk with you about how to get top dollar for it.
A Personal Note
Finally, on a more personal note, Rebecca and I are looking forward to the summer (hopefully, we’ll soon get past the weird weather of the last few weeks). Bennett will be graduating from Richard Montgomery HS in June (congrats, Ben!). And, Ella, who’s finishing up her junior year at University of Colorado at Boulder, where she’s majoring in mechanical engineering, will be home for at least a few weeks during the summer — before and after her summer internship at the Denver airport working with the company that’s working on the major expansion project there.
We hope you and your family and friends are well, and that you have a great summer. If ever I can be of help with anything, just let me know. All the best!