On Thursday, the National Association of Realtors will release new data on September home sales across the country. It will give valuable information on how effective the Federal Reserve’s interest rate hikes over the last 6 months have been.
According to US World News and Report, the data is expected to show a 25% drop in the number of existing home sales from this time a year ago. The main factor in that decrease is aggressive interest rate hikes that have doubled mortgage rates to 7% from the spring. The numbers are also expected to show declines in the number of building permits and new construction starts.
“[The market] is certainly more balanced in the sense that buyers can spend some time looking at houses because they know it’s going to be there for an extra day or two,” said Ryan Haarer, a real estate agent and partner at Haarer & Joseph in Denver.
Despite the total number of home sales declining by 25%, it is not uniform and depends on where you live.
In Denver, home sales have fallen 74% over the last year, according to Redfin. In Phoenix, they have fallen 67%, but in Detroit, home sales have only fallen 1%.
“For every 1% increase in interest rates, you lose about 10% of your buying power,” said Haarer. “So, I had a lot of people who were in the market 6 months ago wanting to buy a home, let’s say they were preapproved for $500,000, if their rate went up 1%, they’re now preapproved for just $450,000.”
It is a far departure from 2021 when homes were flying off the market in record time. Oftentimes, buyers would have to pay tens of thousands of dollars above the asking price just to be considered, and they would have to make an offer on the spot since homes were selling the same day they were listed.
Now, buyers have some more time to consider their options and make an offer.
“The market changed extremely fast,” said Haarer. “That’s part a lot of the confusion right now is that we’re waiting for some sort of a trend when really people don’t know where we’re headed.”
It leaves the golden question: When is the right time to buy? Haarer says it depends on your financial situation and real estate goals.
Real estate experts say there are creative ways to make buying with higher interest rates more affordable. You can ask for repairs that may have cost thousands of dollars a few months ago. You can also buy down your interest rate by paying more upfront in exchange for a lower rate over the first few years of your loan.
