Did you know? On average, home prices rose by 21% in March from a year ago. This marks the strongest March year-over-year growth on record. What was the reason for this? Most likely, this was due to pent up home buyer demand combined with more buyers entering the market in a race against expected mortgage rate hikes. As a result, the first quarter of this year was one of the most competitive housing markets since the beginning of the pandemic. In fact, approximately 70% of homes sold during this time went for more than asking price.
What to expect moving forward
As we have covered in previous articles on this blog, the Federal Reserve is adopting an aggressive approach to combat sky high inflation. Needless to say, their primary tool is to raise interest rates. In fact, some have viewed the pace of the Federal Reserve’s rate hikes to be quicker than expected. As a result, we are already seeing the housing market being impacted by these rate hikes. One example of this is the drop in number of home buyers in the market. We recently wrote about this here.
This drop in the number of home buyers is already leading to price reductions for many homes listed for sale. In fact, the number of price reductions is currently at its highest level in the past 2 1/2 years. (As of May 2022 data, 19% of home listings reduced their price.) Moving forward, we expect the overall inventory of homes for sale to improve as well. This should ultimately lead to a more balanced market, instead of the seller’s market that we have seen over the past few years. Although we should see inventory improve, it will likely be at a fairly gradual pace. The reason for this is because many would-be home sellers do not want to trade up to a new home at a higher mortgage rate. For perspective, approximately 51% of current homeowners in the United States have a mortgage rate under 4%.
In closing, we are already beginning to see the housing market cooling off. As for home prices, they are largely expected to gradually increase for the rest of the year throughout most markets. As mortgage rates increase, this will continue to decrease home buyer demand. Ultimately, we are seeing a rebalancing of the housing market towards a more balanced market overall. As a result, buyers will have a little bit more negotiating power and sellers will have a little bit less pricing power. As a reminder, real estate can be a great hedge against inflation. For more on this, see our previous article on this topic here. Do you need assistance with buying or selling real estate in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today!
At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our trusted “Florida Home Search” app is available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!