According to the National Association of Realtors, with interest rates edging toward 5%, there will be an inevitable slowdown in home sales.
A decrease in multiple offers, and more days on the market (DOM) are some of the earliest signs of the market cooling down. Rising costs in everything from groceries to gasoline to lumber are eroding the power of the low interest rate and down payment. Yet some home prices are still high in the San Francisco Bay Area.
Another factor to look at, if prices are to fall, are mortgage applications to purchase a home. They dropped 10.1% annually in the week ending March 25, according to the Mortgage Bankers Association. A year ago, the 30-year fixed-rate mortgage was 3.18%. Last week it averaged 4.67%. 5% mortgage rates most likely will be here sooner than what experts had predicted when it would happen.
History has shown that prices can fall, the important question is when it’s going to happen and by how much. History has also shown that where there has been the most price appreciation, that’s where the price drops are most likely to happen.
The historic housing storage makes the demand for housing strong and there are many buyers that can afford the rising interest rates, especially here in the SF Bay Area. Sellers may be reluctant to move and if they have their homes for sale, and don’t get the high price they want, they may pull their “For Sale” sign from the front lawn.
So what to do? Instead of trying to “Time the Market” for possible house price drops and the certainty that interest rates will rise (which by the way erodes your purchasing power) let’s put together a sensible buying approach for the right home, at a good price where you can also avoid “Buyers Remorse.” Give me a call for more home buying tips.
