Typically, and historically, at least for the last 30 years, spring has always then been the breakout season for buying and selling real estate, traditionally existing homes. But this year, due to a number of different factors such as the shortage of available existing homes on the market and the increase in the mortgage rate for a 30-year fixed-rate loan, has, in some markets have forced the transactions to nearly come to nearly a screeching halt, comparatively speaking.
Inflation is also taking its bite out of the family budgets, eroding the real dollars from household budgets, so causing this market to really buck the historic trends as never before. At this point, tThe number of homes sold or expected to sell are behalf of what they were in 2021 when interest rates were half of what they are today.
In 2022, the 30-year rates were down day over day (DOD) and week over week (WOW) at 3.125%. With these terms, anyone fitting a borrower would have been looking at a $1,393.61 mortgage payment on a $375,000 home, but the cost of the same mortgage payment today is would be up by as much as $500 more a month. As long as the Fed continues to put its thumb on the scales, the housing market will continue to be chaotic and difficult to navigate for both buyers, sellers, and the real estate agents.
Even though the shrinkage of existing homes for sale has hit somewhat of a bottom, the average sales price for single family homes in New Jersey are still on the rise on a year-over-year basis. The combination of inventory shrinkage, Fed rate hikes and inflation, the seasonality that the real estate industry has become accustomed to no longer exists.
Right now, interest rates are driving the entire market are. Until they ease up, and in the direction of 5%, affordability will continue to be something that will constrict the liquidity of the market. Presently, home buyers and sellers have to be judiciously sensitive to market rates. For when the rates show any weakness, the buyers will come in quickly in order to take advantage of a lower monthly mortgage payment.
In addition, the bidding wars that have been so commonplace in 2022 are easing up cooling off. and u Up to 40% of all homes being purchased are cash deals. The market is also being influenced other factor that is influencing the market is that by sellers who are paying a low interest rate on their current home. They are wary of selling the home that they have with an attractive rate and buying another home at a much higher rate, meaning a larger and having to pay more for a mortgage payment. In some cases, unfortunately, some analysts are predicting that interest rates may even reach up to 8% by next year. If that becomes the common rate, the real estate industry will be forever transformed by a historic contraction.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single-family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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