In 2020, mortgage lenders have reduced their borrowing rates in response to the pandemic-fueled economic crisis. This has led to a sharp increase in buyer demand. And the real estate market hasn’t really returned to normal since.
These days, buyer demand is not as intense as it was when lenders were offering a 3% hike. mortgage rates. But demand is still strong and housing remains expensive.
If you’re considering buying a home, it might pay to wait until the real estate market calms down a bit – both generally and, more importantly, in the context of your local market. Here are some signs that might indicate this is happening.
1. Homes stay on the market longer
The typical number of days a home stays on the market is indicative of buyer demand. When houses are bought back a few weeks after being listed, it is a sign that the market is in turmoil. When homes sit on the market longer, it’s a sign that buyer demand isn’t as strong.
If you’re hoping to take advantage of a down real estate market, enlist the help of an agent in your area who can keep tabs on this data. Ask them to track the number of days homes are on the market, so they can let you know when that number starts to increase.
2. Inventories are increasing
At the end of September, there was a 3.4-month supply of homes available nationally, according to the National Association of Realtors. That’s well short of the four to six months’ supply typically needed to fully meet buyer demand.
When there is little inventory on the market, it is a sign that buyers are active and purchasing homes. When available inventory increases, it is a sign that buyer demand is decreasing.
Another factor you’ll want to track in the context of your local real estate market is real estate inventory. Once you see it start to pick up steam, you’ll know it might be a good time to start looking at different properties to make an offer.
3. Housing prices are falling
Sellers can get away with charging high property prices as long as buyers remain interested and willing to pay. When home prices start to fall, it’s a sign that things are calming down and buyers aren’t rushing to make offers on available properties. If prices are trending downward, it may be time for you to strike.
Are mortgage rates indicative of a rising or cooling housing market?
Not necessarily. It is true that lenders sometimes offer lower interest rates on Mortgages to stimulate demand. But in 2021, buyer demand was really strong at the start of the year – and rates remained low throughout the year when they easily could have increased.
It’s definitely not a bad idea to keep an eye on mortgage rates if you’re looking to buy a home. But if your goal is to launch your search at a time when the market isn’t as hot, you may want to focus more on the factors above.
The reality is that the mortgage rate you set on your home is not necessarily set in stone, as you may have the option to refinance the loan down the line. But if you buy a house that would normally sell for $450,000 for $500,000 because the market is hot, you can’t write off your purchase price. It is therefore important to consider the above factors so that you can, ideally, purchase at a financially sensible time.
