In recent years, property values have soared and the shortage of homes has resulted in many bidding wars among buyers. The housing market without question has been in the seller’s favor as they could expect full price and even over–asking–price offers.
This climate has had many Americans recalling the crash in 2008 and wondering, is a housing bubble burst inevitable?
Many U.S. economists and real estate experts have noticed a shift in the market as buyers aren’t willing to pay the high asking prices at an increased interest rate. This has resulted in sellers lowering their asking prices and has created a market that is shifting in the buyer’s favor.
“The housing market has tilted sharply in favor of sellers over the past two years, but there are very early preliminary signs that the winds may be starting to shift ever-so-slightly,” said Zillow senior economist Aaron Terrazas.
However, this is not an indication of a housing bubble pop. Median home list prices are still up 7% year over year this August, according to data from realtor.com.
“The signs are pointing to a market that’s shifting toward buyers,” says Danielle Hale, chief economist of realtor.com®. “But in most places, we’re still a long way from a full reversal.”
Why is the real estate market slowing down?
In addition to buyers unwillingness to pay higher asking prices, another reason for the real estate slowdown it the mortgage rates that continue to rise. So not only are buyers paying more money for less property, it is becoming more expensive to even secure the loan.
Just to put things in perspective, according to realtor.com, each percentage point can add about $143.00 to a monthly payment on a median-priced home of $300,000. And this figure is based on a 20% down payment. That can add up to several thousands of dollars over the course of the loan.
Buy now or wait?
The increase in mortgage interest rates has had many borrowers wondering if they should wait for the market to slow down even further and interest rates to lower. So what can we expect for interest rates in the future? Is it better to buy now or wait?
Although it is impossible to see exactly what the future holds, rates are expected to rise to between 5.5% and 6% over the next two years if the economy stays status quo, according to Len Kiefer, deputy chief economist at Freddie Mac. So homebuyers who are on the fence may want to act soon before they are stuck paying even higher rates to secure their loan. It’s best for potential buyers to consult with a mortgage lender to learn more about their options and help them navigate through the process.
About Michigan Mortgage Expert, Julie Krumholz
Julie Krumholz, is a Michigan mortgage lender at Superior National Bank. With over 30 years in the mortgage industry, Julie’s goal is to provide the best possible mortgage experience and the most competitive rates. Julie has vast experience in FHA loans, VA Loans, USDA loans, portfolio loans, MSHDA loans and more.
Contact Julie today at: 586-382-5482
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