Waiting for the right time to buy that home? What the spring might bring
In spite of predictions that house prices would fall sharply in the wake of rising mortgage rates, prices have actually retained their value over the last year. They have even risen slightly in the first part of 2023.
A typical U.S. home is now worth $329,542, which is only 4% below the peak value that was set in July 2022.
Read More »A new mortgage for an average home with a 5% down payment was $2,310 in October, 2022. It then fell to $2,100 by the end of January 2023 before ticking up again.
By way of comparison, a typical monthly mortgage payment in January 2020 was $1,127.
Sellers are Holding Back
At rates tick back up, sellers are once again holding back. Although buyers are coming back to the market, many sellers are failing to list their homes, meaning that fewer are for sale.
The 230,000 new listings on the market across the country in January were the lowest recorded by Zillow since it first began keeping records in 2018. Sales are close to the levels seen in the midst of the pandemic in 2020—indeed the number of houses that were for sale in January 2023 was the second-lowest on record.
As a result, competition for homes that are well-priced is greater than before the pandemic, but the bidding wars of 2021 and early 2022 are unlikely to return any time soon.
Would-be buyers who felt that they were priced out of the market were encouraged when mortgage rates dropped from a peak of 7.08% in November to 6.09% by February 2, 2023. Now however, many have returned to sitting on the sidelines as homes become less affordable.
Spring Selling Season
The question now being asked is: What will the spring selling season look like?
Mortgage rates increased by as much as 0.75 percentage points in the first part of February, showing that you cannot count on a consistent downward trend for mortgage rates this year, Zillow representatives say.
If rates continue to rise in coming months, it would be a dampener, curbing supply as well as demand, Zillow representatives add.
Homeowners who have extremely low mortgage rates will be reluctant to place their homes on the market and buy another house with a far higher rate.
Already, buyers are stretching their budgets in order to afford a mortgage.
Sellers who are waiting to obtain the best price for their listing might find that few buyers are able to afford it.
The risk for sellers who are waiting until April or May to list their homes is that no one knows what rates will do before then, says Jeff Tucker, senior economist at Zillow.
Buyers might go back into hibernation if the dip in mortgage rates early in 2023 proves to be a “false spring,” he adds.
Of course, if rates fall back and drop lower once more, the market will jump back into life.
Advice for buyers and sellers
Here is advice from Zillow for buyers and sellers who are facing the current economic conditions:
Would-be buyers
If you are looking to buy a house, take it slowly and carefully. Avoid rushing into any purchase.
Do your homework, have an inspection, and make a strong offer based on your findings, says Ryan Platzke, a realtor at Helgeson/Platzke Real Estate Group.
Sellers
You are still in a good position, but you will not see a situation such as that when you receive many offers that are all non-contingent and cash. You will, however, receive possibly three offers, Platzke says.
Usually the initial offers come in the first or the second weekend on which the house is for sale.
You will be able to choose which offer on which to go forward and make a decision, comfortably, he adds.
