‘Shock to the System’:High Mortgage Rates Slam the Brakes on the Housing Market
Surging mortgage interest rates are slamming the brakes on the housing market.
Higher mortgage rates, which were trending to climb above 6% last week:
1). Caused Mortgage Applications to fall to a 22 Year Low. 2). Forcing buyers to put their dreams on hold as the cost of homeownership slips out of their financial reach.
“Whenever you get mortgage rates moving up that fast, it’s just a shock to the system. It almost paralyzes potential homebuyers,” say economists.
“They have to reset things so fast. Do they want to buy? Can they buy?”
Couple record high Mortgage Rates with stubbornly persistent inflation, gas prices are high, the fact that the stock and crypto markets are taking a beating, and the prospect of another recession is looking increasingly likely.
“The declines for single-family starts and declines for homebuilder sentiment are clearly flashing recession warnings,” says Rob Dietz, chief economist of the National Association of Home Builders.
“It’s pretty eye-popping just how drastically things have changed,” says Realtor.com® Chief Economist Danielle Hale. “For home sellers, it is a completely different ballgame than it was just a few months ago.”
So, Will Home Prices Finally Fall?
Most real estate economists believe home price growth will slow down or even flatten—but prices won’t come down dramatically.
The theory is simply that there are just too few houses on the market and too many people who want them. For example, millennials are a much larger generation than the preceding one. But builders didn’t put up enough homes to accommodate them as construction slowed dramatically during the Great Recession when there were more homes than buyers.
“There’s been this belief that because supply and demand have been so far out of whack in the housing market, home prices are invincible—meaning they could never correct,” says Ali Wolf, chief economist of real estate consultancy Zonda.
Virtual Realtor vs Full Service
Some have inquired if the Service Level (Virtual Realtor vs Full Service) makes a difference.
The Simple Truth: There is no discernable difference between the number of offers received or the average Days on the Market (DOM) between Listingly Virtual Realtor Service vs Full Service (like Listingly Luxury, Coldwell Banker, RE/MAX, etc).
The reason is simple. “Online Listings” published on the MLS, Realtor.com, Zillow or elsewhere are identical, and it matters not at all what the name of the listing brokerage is.
Each year American’s waste over $86 Billion by overpaying on Realtor commissions.
Don’t be one of them!
List on the MLS 100% Free with Listingly.
You could save over $18,860 on average.
Five Rules for Selling a House in a Down Market
Selling a house isn’t fun in the best of markets. In a tumbling market, it’s torture.
1). Be Aggressive on Pricing. Sellers can get obsessed with getting “full price” or “not giving away the house.” It’s a trap. You want to get the best price you can, not the price you’d get in a perfect world. In a falling market, that generally means selling your house as quickly as possible because it will only get worse.
Start by pricing below the competition. If that doesn’t work and you need to adjust the price after a month or two, lower it by enough to attract a new group of buyers. It’s brutal. But you’re likely to end up with more money by getting out in front of a falling market, rather than chasing it.
2). Know Your Competition. Your house is in a beauty contest with every other house for sale. In a hot market, everybody gets a trophy. In a cold market, few do.
Pore over the internet listings for homes in your neighborhood. Make sure your listing has strong photos so it won’t get lost in the shuffle.
Go to every open house in your neighborhood. If everyone else in your price range has a master bathroom and you don’t, that’s a problem. If other houses have remodeled kitchens, and you don’t, that’s a problem. You’re going to need a lower price to stand out.
3). Little Things Matter. In a weak market, buyers seek perfection. There are things you can’t do anything about — like selling a house on a busy street. But you should eliminate any defect that you can without crazy spending. That means painting, replacing worn carpeting and fixing broken hardware.
When you put a house on the market, it is no longer your home. It is the house you want someone else to imagine as theirs. Get rid of family photos, knickknacks and clutter. Put half your furniture in storage. Suddenly your house will look bigger and more enticing.
4). Don’t Lose a Sale over a Few Thousand Dollars. In a tough market, buyers may demand a long list of repairs after the home inspection, even if the house is in great shape. It’s disheartening, but they know you don’t have a lot of leverage, and they want to squeeze you a bit more.
Offer a discount in lieu of repairs. In a tough market, it’s not worth letting a serious sale blow up over $10,000 or $25,000. It just isn’t.
5). The Highest Offer Isn’t Always the Best. Home sellers are often in for a nasty surprise after Inspections. After signing a contract, buyers often try to negotiate big discount, and the deals often bl0w up.
People who aren’t serious about buying will sometimes offer more money than those who intend to go ahead with the contract.