One year ago, mortgage rates started their rise, and people scrambled to buy homes. That means stats comparing March 2023 to March 2022 won’t make a lot of sense.
CHICAGO – Are negative headlines about the housing slowdown giving homebuyers the jitters just as the busy spring season approaches? Homebuilders think so.
Nearly 80% of builders say the media is stoking fear among consumers about the real estate market, which is keeping many would-be buyers on the sidelines, according to data from the National Association of Home Builders. Only 55% of builders said the same in 2022.
The combination of rising mortgage rates over the past year and stubbornly high inflation also is weighing on buyers’ psyches. But though the latest housing data attests to a potential trough in home sales, “I also think the media plays a key role in how individuals perceive the markets,” says Erin Sykes, chief economist and real estate wealth adviser at Nest Seekers International. “It tends to overtake even what they experience in their own personal lives. But real estate is local.”
Markets such as Las Vegas and Austin, Texas, are seeing a drastic pullback in sales after surging to record highs. But other places, like the Jersey Shore area in New Jersey, are continuing to see bidding wars, Sykes says.
Homebuyers who read national headlines may get a distorted view of what’s happening in their local market. Many consumers may not understand that recent dips in home sales constitute a return to a more normal market after pandemic-fueled peaks.
Sales down 37%?! Explain the dips
With existing-home sales plunging 37% year over year in January, according to data from the National Association of Realtors® (NAR), you may have some explaining to do to your clients. But context is everything.
Real estate professionals should explain the statistics and trends in their local market so clients can better understand the data swings they’re seeing, Sykes says. “So, when looking at year-over-year and month-over-month data, understand the seasonality behind those numbers, too,” she adds. (Florida Realtors have free access to SunStats that can help do this.)
When comparing year-over-year data nationally – and likely locally, too – remember that the spring market in 2022 was “incredibly unusual,” says Jessica Lautz, NAR’s deputy chief economist and vice president of research. Then, “homes for sale had the highest number of offers since 2015, at 5.5 offers. Today, it’s 2.5 offers. Buyers were savvy and knew mortgage interest rates were going to increase and jumped into the market to lock in a home immediately.”
In winter 2022, the national housing market saw the highest activity among investors and vacation-home buyers since 2015, accounting for 22% of sales at the time. Also, national housing inventory dropped to its lowest level since 1999, Lautz says.
“Drawing comparisons to winter and spring of 2022 should be done with caution. It was an unusually hot market – and not a particularly healthy housing market,” Lautz says. “Today’s market still has limited housing inventory, but buyers see some equilibrium with sellers and have the opportunity to determine the best home for them without a frenetic pace.”
Don’t buy into the doom and gloom
Consumers may be anxious about a perceived housing bubble on the verge of bursting, but you are equipped with talking points to calm their fears. In November, 41% of consumers said they believed the housing market would crash in the next year, according to a LendingTree survey of more than 2,000 Americans. But economists are quick to point to plenty of reasons this isn’t a repeat of the 2008 housing crash.
Homebuyers are closely watching mortgage rates, which have occupied plenty of news headlines in recent months. Mortgage rates nudged past 7% in November, more than double that of a year earlier, adding hundreds of dollars to borrowers’ mortgage payments. They started edging down at the start of the year but recently began inching up again, though they remain in the 6% range. Every fluctuation in rates seems to have a direct impact on the number of calls Sykes’ office receives.
“We’re riding the waves of the media,” she says. However, buyers may fare better in the market now than they did a year earlier, Sykes adds.
“This is the first real buyer opportunity in close to three years,” Sykes says. “It’s a great time to take advantage of that. Buyers have time to shop again and make a more educated decision, instead of being caught up in [fear of missing out], where they couldn’t do a home inspection and had to make a higher offer [to win in a bidding war]. That period was not healthy. We’re now in a much more balanced, healthy housing market.”
And that’s the headline Sykes believes buyers should see.
Source: National Association of Realtors® (NAR)