Are bidding wars over?

by Jenny Barthel

For the past few years, the real estate market has been red hot. The strong seller’s market was fueled by low interest rates and the intense focus on our home environment brought on by the lockdowns of the pandemic. As more companies adjusted to allow a more flexible work-from-home option, people were able to move to locations that better suited their lifestyles. As a result, it seemed like buyers were everywhere and listings typically received multiple offers almost immediately. Is this still the case?

The housing market is slowing, but strong

The housing market in the U.S. is finally beginning to cool off, as higher mortgage interest rates begin to push more buyers our of the market. But competition is still much higher than it was pre-pandemic (or B.C. - Before Covid), and bidding wars continue to erupt in some of the country's most expensive housing markets.

Predictions for home prices

Home prices are beginning to show signs of cooling as buyers have pulled back due to mortgage rates doubling this year, which is starting to convince some sellers to lower their price.

However, the overall housing supply remains limited as those who purchased homes in recent years as low mortgage rates are staying put. Additionally, many sellers are waiting for interest rates to drop to have a better chance at getting the price they want.

There are mixed signals about if the housing market will "crash" or if it will simply "correct" itself from the double-digit percentage jumps seen in home prices over the past two years. Most experts are predicting a 5% drop nationally, but some markets may continue to see an average increase of 3% (along with inflation).

In a housing market crash, you would typically see a 20% to 30% drop in home prices and a decline in home sales - far more than what's currently happening. Another indication is a jump in foreclosure activity. Click here for updated Foreclosure Activity in Wright County

Are a lot of foreclosures coming?

While there hasn't been a significant jump in foreclosures to date, foreclosure starts have been on a steady quarterly rise since the federal government ended the Covid-19 moratorium on foreclosures in September 2021. Foreclosure starts were up roughly 1% from last quarter and 167% from a year ago.

A key difference now compared to the last housing crisis in 2008, is many homeowners, and even those struggling to make payments, have had a large boost in the home values in recent years. That means they still have equity in their homes and are not underwater (when you owe more on a house than it's worth).

The forecast for mortgage rates and types

Mortgage interest rates on a 30-year fixed rate mortgage passed 7% in late September 2022 and could continue to increase, however according to most mortgage professionals this looks to be the level for the rest of this year and most of next year. According to an article by The Mortgage Reports, mortgage interest rates are expected to land anywhere between 5%-9.31% by the end of 2023.

I know this sounds like a huge range, but with climbing inflation, aggressive federal reserve policies, elections, and fears of impending recession, this makes mortgage rate movements incredibly difficult to predict - even for the pros. With rate movements being so unpredictable, waiting on borrowing costs to fall could just as easily lead to higher rates when you decide to pull the trigger.

Even if you aren't quite ready to pull the trigger, If purchasing your first home (or new home) is on your radar for the next few years, it's a good idea to consult with a mortgage professional who can keep you updated on rates and available mortgage products.

Know how mortgage interest rates work

Besides the sale price on your home, the interest rate is another key to choosing the best mortgage for your situation. Mortgage rates change a lot, in fact, they actually change every single day. There are a plethora of options out there for either locking your interest rate (fixed-rate), having an adjustable rate, or even buying your rate down - consult your loan officer to see what the effects would be for your payment and what would be the best for your situation.

Should I buy a home now or wait?

Buying a home in any market is a highly personal decision. Because home represent the single largest purchase most people make in their lifetime, it's crucial to be in a solid financial position before diving in.

Trying to time the market or predict what might happen next year is not the best homebuying strategy. Instead, it's better to buy based on your budget and needs. If you find a home you love in any area you love and also fits your budget, then chances are it might be right for you. However, if you feel like you're making too many sacrifices just to get the house, you may end up with buyers's remorse with an expensive asset you need to offload.

Start off by writing two separate lists; wants and needs. I know it sounds really simple, but trust me. Once you figure out WHAT you are looking for, it's time to figure out you comfortable budget. Work with a mortgage professional and calculate estimated monthly payments. From there, they can help you determine the price range you should be looking in to reach your goals. Once you've determined those two important things, It's my job as a real estate agent to help you secure the home of your dreams

Keep in mind, the housing market is cyclical and ever changing. Even though the market is still tipped in the favor of the seller, buyers are starting to have a little bit more breathing room when it comes to their home search.

BUYERS:

if you're planning on pulling the trigger in the coming months, start with your budget and STICK WITH IT. If the timing doesn't seem quite right, there is no shame in holding off until it does. Work towards your goals. Manifest your dream home; your time is coming.

SELLERS:

The first step for a successful sale is finding a listing agent who knows the area and understands the market. Let's face it, everyone thinks their house is special. Even though the market is in a sellers' favor, it's always in your best interest to present your home in its best possible light.

GET MORE INFORMATION

Jenny Barthel

Agent | License ID: 40696030

+1(612) 990-3863 | jennifer@mnpropertyjam.com