Daniel Valdez, an agent at Sacramento’s eXp Realty, said:
So far, deceleration has provided little relief to buyers. Instead, analysts say the heightened affordable crisis caused by the clash between inflation and rising interest rates is driving away potential buyers.
That’s what some sellers do The rise in the stratosphere in 2020 and 2021, which raised average house prices by more than 40%, is reluctant to lower their expectations. Home prices are still rising, averaging 19% in the year to June, according to mortgage data firm Black Knight.
Jeff Tucker, Zillow’s Senior Economist, said: “People who thought they would attend the party have been hit by an absolute genocide at an affordable price so far.”
The chill in the housing market reflects broader changes in the economy as policymakers strive to reach decades of heights. Inflation under control.
Solid interest rates in 2020 and 2021 helped fuel House prices have skyrocketed since the coronavirus pandemic began in 2020. However, after inflation surged, the Federal Reserve has reversed this year, and prices for food, fuel, housing and other necessities have become major economic concerns. The central bank raised the benchmark interest rate three times in 2022, indicating that four more increases are pending. The Recent hikes June was three-quarters percentage points, the Fed’s largest since 1994.
Higher rates mean higher borrowing costs: 30-year average fixed rate mortgage rates Stood at 5.3 percent on ThursdayAccording to Freddie Mac, it increased from 2.9 percent a year ago. It is also consistent with the devastated stock market and almost all cost increases, making it difficult to save down payments.
According to analysts, the resulting “affordable pressure” keeps many buyers out and leads to fewer deals.
Nicholas Gerli, Founder and Chief Executive Officer of Reventure Consulting, said:
Ali Wolf, Chief Economist at Zonda Home, says the signs of a cool-down are everywhere. Inventory has increased significantly. In some places the dwelling is sitting It has been on the market for a longer time and many sellers She said she would lower their asking price to raise interest.
“What we see today is that, in fact, there are limits to buyers,” Wolf said. “Future homebuyers reach a place where they will either intentionally leave the home market to wait and see what happens next, or be forced out of the home market due to the high cost of home ownership. Did.”
According to Redfin data, housing inventories, which represent the number of active lists, are skyrocketing in the country’s most expensive metropolitan areas. It’s up 47 percent in Denver, 42 percent in Oakland, California, and 40 percent in San Jose.
Several markets that changed during the pandemic also braked, says Eric Finnigan, director of John Barnes Real Estate Consulting.
Boise, which has become a pandemic paradise due to its cheap real estate and proximity to the Rocky Mountains, seems to have found its ceiling, Finnigan Said.The value of the homes there exploded 57 percent in 2020 and 2021 as people flooded. The largest city in Idaho. However, prices in the year ended in May rose by just 3%, showing a turnaround that Finnigan called “superb.”
Many first-time buyers who landed at home after 2020 paid more than they thought it was worth it or asked their families for help.
After paying the rent for only 10 years, 32-year-old Myles Hughes wanted his place. At the end of last year, he got married and moved from Florida to Albuquerque to change his landscape.
Hughes, a site manager, actor and independent filmmaker for a space rental company, said he was beaten by other house hunters everywhere.
He visited dozens of properties in four to five months, but many of his serious candidates were kicked out of the market within a few days, he said. He said he lost six properties, even though he submitted bids quickly and increasingly above the asking price. As searches continue to rise over the months, interest rates continue to rise, prices continue to rise, how long it takes sellers to adapt to new economic conditions, and the Fed’s budget for buyers is squeezing. I highlighted what is being done.
It was bid number 7 that won Hughes’ new home. However It was with the help of his dad. He paid for all cash offers. “We could only afford to fight in the bidding war,” he said.
According to analysts, buyers and sellers are just as frustrated because there are no affordable options.
The old “30% rule”, a financial planning maxim that argues that one should not pay any more As a result, 30 percent of their income is passed on to real estate. Black Knight reports that the typical payment-to-income ratio based on today’s higher interest rates and still higher prices has skyrocketed from 24 percent to 36 percent since January. By this standard, housing is at the most affordable point since the early 1980s.
Brian Brackeen, who runs Cincinnati-based venture capital firm Lightship Capital, has seen first-hand the changing dynamics of the housing market.He bought his house At the end of last year, I bought my daughter in Tulsa’s starter home in April.
For his daughter’s house, the charges were much higher and the down payment was more difficult to consider, he said. He also noticed a change in the attitude of the seller. There, many are stubbornly holding high asking prices, even though the market is shifting from their favor.
“If you’re a seller and you’re very close to the gold rush, you don’t want to give up that money when your friends sell at the highest price on the first day with multiple offers,” he said.
Brackeen sees the pool of future buyers as well.
“The world that sellers are dealing with today is more like a regular local market than the previous Covid Fuel supermarkets where people across the country are entering each other’s markets and increasing the number of buyers in certain locations. increase.”
In the end, Bracken’s daughter’s house was valued below the purchase price, so both parties had to give up thousands of dollars, he said. “The bubbling of the market is not like it used to be.”