It's a question that seemed absurd not long ago. Could prices actually drop? There are reasons to believe that we are on the cusp of seeing housing prices fall throughout our area. Prices have
Are Prices going to Fall this Fall?
Dated: September 13 2022
It's a question that seemed absurd not long ago. Could prices actually drop? There are reasons to believe that we are on the cusp of seeing housing prices fall throughout our area. Prices have already fallen in some parts of the country and there are several reasons to expect that our recent price reductions are just the beginning of an overall trend.
First, the rapid increase of interest rates caused a substantial decrease in buyers. As many homeowners locked in at rates in the 2-3% range, either through a new purchase or refinancing, it now does not make financial sense to move with rates at 6% or higher. With this decrease in demand, supply has slowly increased throughout the late summer. Inventory data has increased each of the past 3-4 months and we expect to see the same when August data is released.
Second, as The Fed continues to combat inflation, rates are likely to continue to creep higher before they go down again. Given the August inflation data, it is expected that The Fed could increase The Fed Funds Rate by as much as a full point. Initially, this will likely push mortgage rates down slightly in the short term, but within a few weeks, we expect the mortgage rates to increase. In order to meet offset the higher rates, sellers are going to have to reduce their prices or buyers will continue to shy away from the market.
Prices are determined because of the relationship between supply and demand. As demand goes down or supply goes up, prices go down. Both are happening at the same time right now - supply is increasing while demand decreases. It is inevitable that prices are going to drop in order to meet the market where it is. How far? I read one publication today that indicated that it will take a 15-16% price drop in order to balance the rate increases. To motivate buyers, sellers are going to have to find the pricing sweet spot. It has not been easy to find, but I am seeing 10-15 price reductions a day right now as sellers search for the price that will attract the right buyer.
My advice to buyers this month: make an offer. You could secure a home for below market value. Are the mortage rates high? Yes, I was quoted 6.375% yesterday, but they are very likely not permament either. Once inflation is under control, it is very likely that we will see The Fed reverse course and lower rates, which should bring mortgage rates down as well. Then, you refinance...you will have a new home that you purchased for a great price and a great rate.
Hi there! Thanks so much for stopping by. I look forward to working with you. Although I am not a native to the area, I was introduced to Horseshoe Bay in 2000 and have been visiting ever since. I lov....