New factors are influencing the residential real estate market

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This month, Berkshire real estate professionals discussed home inventory, buyer demand and how an environment with rapidly changing mortgage interest rates could impact sales in the coming months. At the end of the third quarter, the historically high pace of real estate sales in Berkshire County in 2021 was not sustainable; there had been a 5% decline in dollar volume traded so far this year and a 10% decline in the number of residential homes sold. Despite this declining sales momentum, the median home sale price rose 6% to $325,000 countywide. It is important to note that in 2019, from January to September, sales amounted to $295 million, compared to $456 million this year to date. The 2020-2021 market expansion has been significant.

Looking at market activity in mid-October this year, some properties listed for sale are still generating multiple offers, while others are reporting significant price reductions in the first few weeks of listing. Sellers face a shifting market and cautious buyers. In this rapidly changing market, it’s important that sellers work with local real estate agents who have up-to-the-minute access to market data as well as unrivaled knowledge of real Berkshire market conditions to achieve their real estate goals.

As the broader U.S. economy struggles, mortgage rates fluctuated wildly in the third quarter of 2022 in an attempt to correct inflation issues. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors, put it, “Three main factors are affecting mortgage rates in today’s market: inflation expectations, economic growth, and the next rise in mortgage rates. Fed rate. Inflation and higher interest rates generally drive up yields as investors demand a higher return.

The average 30-year fixed rate was as low as 4.99% in August, but it was 6.7% at the end of September, according to Freddie Mac. Mortgage rates exceeded 7% in October. Freddie Mac and the Mortgage Bankers Association forecast the average 30-year fixed interest rate to be 5.4% and 5.5% for the fourth quarter, but the National Association of Realtors forecasts 6% by the end of the year. end of 2022.

For purchasing power, by borrowing $300,000 at an interest rate of 7%, a buyer’s monthly payments would be almost $2,000. In early 2022, when interest rates were around 3.5%, monthly payments on a $300,000 mortgage would have been just under $1,350. The same loan now costs about $650 more per month.

While rising mortgage interest rates lower demand as the Fed had hoped, many buyers see the change as an opportunity to enter the housing market with some leverage. Contract negotiations are resuming in a more balanced market, and appraisers and home inspectors are carefully analyzing the home’s stability and long-term value.

Despite the slowdown in demand, there is still a shortage of available homes which makes some properties popular and competitive for interested buyers. In September, there were 614 homes on the market for sale in Berkshire County, down from 1,759 ten years ago, a drop of 35%. Since 2013, the stock of houses for sale has continued to decline. The many factors contributing to lower inventory include low construction rates in our region, a larger population of citizens seeking home ownership, a dearth of optimal living options for active seniors, and the attractiveness of investing as a solid strategy for long-term wealth.
All real estate professionals are urging buyers in the market to keep pre-approval letters from their lender up to date to ensure their price range remains accurate with the latest rates. Real estate professionals are also asking their low-income buyers to investigate new programs launched by Freddie Mac, Mass Housing and in conjunction with local lenders and agencies. Next week, stay tuned for the in-depth quarterly Market Watch report with city details and highlights on other property types.

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