What do rising rates and low inventory mean for you?
Inventory is typically a big driver of home prices. The supply of homes decreased by 50% year over year, and home prices have increased by 16% in that span. If you’re looking to sell a home right now, that means you’ll have very little competition. As inventory begins to rise, that competition will increase, and prices will dampen.
In June and July, the median home price for single-family homes dropped to $855,000 and then to $850,000 in August. In September, it jumped up to $860,000. Part of the reason for this was a lack of home sales above the $2 million price point, which drove down the median price. Now, things have picked up again in the luxury market, which is driving the median price up back up.
The list-to-sales price ratio is around 101%; for a while, it was between 103% and 104%. That’s why we saw a rapid appreciation of prices, which is now starting to calm down. We’re starting to see better prices and fewer competing offers on homes. That said, if a property is well-maintained and in a desirable location, it will receive multiple offers, and it will likely sell for over asking price. If the house has some issues and isn’t in as desirable an area, then it will probably sit on the market for longer and might undergo a price reduction.
Currently, our days on market is 21 days. That’s been ticking up very slowly from the 18 days it was before. What does that mean for you? Well, if you’re selling, it means you should consider what it will take to prep your home for sale, be that deferred maintenance, landscaping, or boosting your curb appeal. A fresh coat of paint always goes a long way to cleaning up a house, and if you’re planning to spend more money, spend it on the kitchen—that’s where you’re going to get the biggest bang for your buck.
If you’re thinking about buying, the market is slowing down a little, meaning you won’t have to compete against as many offers, though there might still be some competition depending on where you’re looking to buy. Additionally, interest rates are likely going to start rising. Mortgage rates have been historically low for a long time, but the Fed has announced that they’re going to taper their bond-buying program, which has generated concerns about inflation. Right now, rates are hovering around 3%, so now is a good time to lock in a low rate before they go up again.
Another consideration is that we’re heading toward the holidays. Historically, home sales slow down around the holidays, which is probably one reason why we’re seeing lower inventory right now. That said, inventory is so low that prices should keep prices up through the wintertime, which is when you’d normally expect lower prices. However, there are also fewer buyers in the market; many decided to wait until after the New Year to take up their home searches. For sellers, there might be a smaller pool of buyers, but the buyers in the market tend to be more serious around this time of year.
If you have any questions about buying or selling a home, or you need any assistance with your real estate goals, don’t hesitate to give me a call or send an email. I’d love to hear from you.