How Low Will It Go?
The keyword in real estate is usually location location location. While that still applies, currently what we’re hearing is inventory inventory inventory. As the count of homes available for sale continues to dwindle, other economic impacts are being felt by buyers. The regional median price rose by more than 7 percent to $255,000 as compared to March of 2021 with 98.6 percent of the original list price or more being obtained by sellers. Encouraged by the market activity and most likely aware of the Fed’s planned rate increases, 1,207 sellers entered the market by listing their homes in March prompting nearly 30,000 showings throughout the month. Closed sales decreased by 17 percent from March 2021 to 904 for the month, marking seven consecutive months of decline.
Across the country, consumers are feeling the bite of inflation and surging mortgage interest rates, which hit 4.6% in March, according to Freddie Mac, rising 1.4 percent since January and the highest rate in more than 3 years. Greater Capital Association of REALTORS CEO, Laura Burns, remarked that “ The rates of the last two years were an anomaly due to the pandemic. Buyers and potential buyers should keep in mind that historically, a 5 – 7 percent rate is still low for a 30-year fixed-rate mortgage – nowhere near the 16 percent rate buyers dealt with in the early 1980s. It’s not the 2 – 3 percent of 2020 and 2021 but that was a forced low rate to keep money moving during the pandemic.” GCAR President Kendal Baker, of Markers Octagon Realty, agreed adding, “As the Fed takes the corrective steps needed to get the economy on an even keel, with rising rates we know we’re really getting back to normal”.
“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” said Lawrence Yun, NAR’s chief economist. “Still, homes are selling rapidly, and home price gains remain in the double-digits.” In March, homes in the Capital Region spent just 40 days on the market before sale.
Inventory of homes for sale at the end of March totaled 1,547 units, down 44.6% from one year ago. Unsold inventory sits at a 1.3-month supply at the present sales pace, down from 2.2 months in March 2021.
Fewer existing homes for sale compared to last year turns attention toward new construction. With builders unable to keep up, new construction experienced a nearly 20 percent rise in median sale price over 2021 to $470,818 in the Capital Region.
If compared to the prior “normal” year of 2019, new construction’s price increase is close to 30 percent. As long as demand is high and inventory is low, 2022 will continue to see year-over-year price increases if buyers continue to show up ready to pay “normal” interest rates in what remains an abnormal market.