What Higher Interest Rates Mean To A Buyer…
Home sales saw a 21% drop in units based on October 2021 and October 2022 numbers. There are several factors in this drop, but the most dramatic indicator is the rise in mortgage interest rates from 3.1% to 6.9% in those two months. For a median priced home, this translates to a loss of $162,000 in buying power. It is the main cause seen for the decline of more than 1.3 million sales in our country. It is one of three principal factors involved in purchasing power (interest rates, income and price).
The silver lining in this is found in the November 30 press conference by Fed Chair Jerome Powell. He reaffirmed a future rate increase but said it would not be as steep as the past three increases. Household income isn’t rising fast enough to compensate for the already increased rates, and home prices haven’t adjusted to match the lost buying power. Still, many see a slow down in inflation and the announced modification of the next rate increase as good signs of things to come.
A second silver lining depends on where you live. A Nov. 4 New York Times article points out that year- over-year supply of homes for sale have grown by a high of 167% (Phoenix, AZ) to a -28% (Hartford, CT). Los Angeles metro area has had an increase of 44%, while the Riverside area has 73% more inventory waiting for a buyer. These opportunities for matching a buyer with a seller nationally are greater than anytime since 2014.
Please give us a call at Premier Funding Network to answer any of your mortgage questions, 714-283-9900.