Homebuyers may eye the sudden dip in US mortgage rates as a welcome opening. But with sellers starting to cut prices, experts say the market cooldown is just beginning.
Consumers navigating the least-affordable housing market since the mid-1980s are facing a precarious time with recession fears mounting, inflation pinching and mortgage rates looking nearly as volatile as the stock market. And nobody likes to buy at — or near — the peak.
Rates have edged down a bit, with the 30-year average plunging to 5.3% in its biggest one-week drop since 2008, according to Freddie Mac. While the slump may provide an opening for some buyers who were waiting for competition to ease, mortgages are still nearly twice as expensive as they were at the start of the year.
While home prices are still appreciating, there are signs that the growth is starting to slow. Experts don’t believe a crash similar to 2008 is on the horizon. But the correction is only just beginning, according to Mark Zandi, chief economist for Moody’s Analytics.
“It’s a particularly bad time to buy right now,” Zandi said. “If I were a buyer, I’d be waiting. Affordability has been crushed, demand is weakening rapidly, and listings are rising. I expect house prices to go flat in some of the most active markets and for some to come down.”
In some markets, the tables are already turning. Buyers can now afford to become pickier, according to Keith Gumbinger, vice president at mortgage-information company HSH.com.
“It’s a market for buyers that are opportunistic,” Gumbinger said. “You need to be nimble, whether it’s grabbing a home deal if it comes by or an opportunity for a low mortgage rate.”
Location Matters
Like everything in real estate, so much depends on location. In some areas, buyers are still fighting over tight inventories even if the frenzy has abated slightly. But in pandemic-migration destinations such as Austin, Texas; Sacramento, California; and Las Vegas, competition has eased significantly and more sellers are having to slash prices to catch buyers’ attention.
“Sellers have been shooting for the moon, but the people who are serious about selling need to come back down to reality,” said Lindsay Neuren, a broker with Compass in Austin. “They’re going to have to price at the middle end of the market or lower end of the market to attract multiple buyers.”
In Manhattan, the stock market drop and higher rates are starting to cool one of the most expensive housing markets in the country.