High interest rates are cutting into new loan applications for mortgages, car loans, home equity, etc. Reuters has this article detailing their findings on the decreases:
www.reuters.com/business/finance/us-banks-report-weaker-loan-demand-fed-survey-says-2024-05-06
How can that be a good thing? As a trend, it’s exactly what the Fed wants to see as a first step to lowering stubbornly persistent inflation, which helps alleviate the biggest bottlenecks in the Real Estate Market: Low Inventory and High Interest Rates/Loan Costs. OK… buyers & renters looking to buy are all saying: “That’s great, but what about me?”
Prospective buyers are weighing decades high interest rates or the high interest rates have priced many out of even applying for a loan right now. Current tenants looking to move to home ownership have been experiencing the same thing. Essentially, these people are either cut from the market or forced to spend a lot more, if they really want a home now. Those that can afford it are just biting the bullet. Last week the mortgage interest rate slipped below 7% for the 1st time in almost a month and half. It’s been wobbling back and forth like that for a long while now, but it’s at least momentary relief and possibly an indicator of better times ahead.
To make the situation even tougher, home sellers have been sitting on listing their properties for a variety of reasons. Many want to see just how high list prices can go, so they wait for the market pinnacle. The skyrocketing seller’s market is seemingly topping out now after the post covid rush. Conversely, others are waiting for list prices to drop, so their next house isn’t as expensive as it would be right now. New listings rose in April by 10% over 2023, but remained flat week to week through May 24, so there’s some mixed signals there. High interest rates and loan costs are another issue. All of which are predicted to be on a path to greater balance in the coming months.
I’d argue that buying now is risky, IF you’re looking at flipping a property or just planning on staying a couple of years. If you can qualify for a loan, can afford to pay the higher costs and plan to stay in the property for a while, the interest rate problem can be limited by refinancing when the interest rates come down. That’s projected to happen sometime in 2025 at the latest, possibly this Fall.
The bigger hurdle I see for those capable of buying now is the still very skewed Seller’s Market, with ridiculously low inventory continuing to jack up list pricing. A high selling price can’t be overcome with refinancing. It is what it is. The decrease in loan applications indicates a coming shortage of buyers, which should help lower prices as the coming decrease in buyer demand forces sellers to be more competitive. Many economists predict list prices coming down as soon as this Fall, but more likely in 2025. Builders loan applications are increasing a bit, so the builders, by and large, are feeling bullish on future markets too.
Add in the decreasing loan applications, builder sentiment, economist prediction, potential for decreasing inflation, pent up demand among sellers waiting to get into the market, and the potential for a powerfully better market for both buyers and sellers is in the building phase right now.
My prediction is we’ll feel continuing wobbly conditions through Summer, then see some slow rolled improvements in the Fall and a wildly active Spring in 2025. Fingers crossed.
Have Fun!
Thanks,
Lew
Lew McConkey,
Brook Realty, Serving Whitman Hanson & Surrounding Towns
(781)252-9789
If you have questions about your place in the current Real Estate market, as a buyer, seller or Landlord,
Please feel free to call text or email for your free, no obligation consultation.
Lewmcconkeyhomes@outlook.com