The housing market buzz is focusing on when the current sellers’ market will peak, and signs are flashing; now is the time to sell.
A March 3 Market Watch headline put it this way, “Thinking of Selling Your Home? Don’t Wait.” A week later, George Ratiu, senior economist at realtor.com® was quoted in Real Estate News & Insights saying, “rising (mortgage) rates could prevent home prices from rising much further, as the rate increases make monthly housing payments more expensive.”
February’s Northeast Tennessee Association of Realtors® (NETAR) Home Sales Report listed the local average sales price as $216,568. That’s a 27 percent increase from last year. What it means is the average sale put $46,454 more in the seller’s pocket than it did for those who sold in February last year.
Home prices have been on a tear since the local housing market made its sharp recovery after COVID-19 took the wind out of last year’s spring buying and selling season. The recovery began stirring in May and took off in June with monthly double-digit price gains, but some sellers held back. They were leery of having open houses when COVID cases were increasing. Experts say those who are still thinking about selling are missing the best market in more than a decade.
The housing price increase juggernaut was driven by a record-low inventory of homes on the market, bargain-basement mortgage rates that gave buyers additional buying power, and a bad case of cabin fever from folks who wanted more space and a home that better met their needs.
Now one of the key drivers is retreating.
Mortgage rates are increasing. So far, the hikes haven’t been big. However, the 30-year fixed rate moved above 3 percent in early March, and the handwriting is on the wall. Many sources – like the National Association of REALTORS® chief economist Lawrence Yun – think rates will be at 3.3 to 3.5 percent by the end of the year.
Rates are going up because the economy is beginning to improve, and more is just around the corner as more and more people are vaccinated. The bottom line is increasing mortgage rates are taking away the additional buying power consumers – especially first-time buyers – have been putting to use for a home purchase.
“The era of mortgage rates under 3 percent is likely behind us,” according to Ratiu. “For first-time buyers, the market is looking a lot more challenging. The current trajectory of interest rates is putting the damper on their budgets and making it more expensive to buy a home.”
There were 554 existing home sale closings last month. That’s 48 more than February last year and 58 fewer than January. Don’t expect sales to tank. Growth is still in the picture, but the lack of inventory is squeezing the growth rate.
The region currently has 1.4 months of inventory on the market. At the current sales pace, a little over half of the region’s inventory is sold each month.
The region won’t shift to a buyers’ market anytime soon, but we are likely at or near the peak of the current cycle. That’s doesn’t mean buyers should give up and wait. Good deals are available for those willing and able to compete in today’s inventory-short, multi-offer market.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee – Southwest Virginia region representing over 1,400 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee.