The higher interest rates are having an effect on the housing market, but that is no surprise. Over 6 months the 30 year fixed conforming loan rates have jumped from 2.75% to 5.5%. The slowdown is started to be reflected in the local housing numbers.
New listings are flat month over month. Inventory is starting to go up as new sales slow. Is this a weak real estate market? No. When slowing from 100 mph to 65 mph it feels like you’re crawling, but you’re still moving along.
Elements to be aware of:
Many marginal buyers will have an issue with qualifying for loans with the higher rates. Adjustable-rate mortgages or interest-only payment loans may be the way to go (for now).
The stock market dropping over the past couple of months takes some liquidity out of the system. Timing on liquidating funds held in financial markets may be critical. Underwriters need to make sure the money is there for down payments and closing costs, but also required reserves (lenders don’t want buyers broke when they close a transaction).
Property owners may hold off on selling a property with a low-interest rate mortgage if they’re thinking about purchasing a new property with a higher interest rate (they’re spoiled).
Don’t expect a substantial drop in housing prices. There will still be an imbalance between buyers and sellers for at least a few more years. Most of the drops in price will be sellers adjusting list prices to a more logical level, but sales prices will still be solid.
New construction inventory is having a hard time coming online as there are still labor shortages and supply chain/cost issues on materials and appliances.
Real estate has always been a good hedge against inflation. Rents are rising faster than property values.
Property flippers have to sharpen their pencils (Be conservating on their numbers). A hot market can always bail out a dumb flipper… but a weak market can hurt a smart one.
The normalizing of the market would be healthy, but we’ll have to keep our eyes on the Fed, inflation, rates, and inventory levels. The Fed is raising rates to slow consumer demand, but will they go too far and cause a recession? If there’s a recession, and inflation drops, rates will come back down, but from what level?
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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