If you are considering Selling or Buying Real Estate or if you like to be up to date on one of your most valuable assets, you may be wondering what is going on with our local housing market. It is the most asked question we receive that sounds something like this, “‘How is Real Estate??! Is anyone buying or selling because of the interest rates?’. ” The short answer is YES, yes they are! But, in select segments.
It’s important to tune out the buzzy (fear-inducing) headlines and objectively analyze the local data, which is the goal of today’s article.
Brown County Housing Market at a Glance
The general market performance is pretty consistent with what we saw last quarter. In Brown County, we are down 19% from this time in 2022, while the rest of the country is down about 30%. Inventory levels continue to remain critically low. Hence, the prices increasing… again. They were holding steady for a bit now they are on their way up again (not as drastically though). Our average home sale price is up 11% over last year.
Effect of Current Interest Rates
It’s no secret that higher interest rates have a very big impact on the housing market. Presently, interest rates are in the high seven/eight range and are predicted to climb higher. Just a few short months ago they were predicted to fall into the 5% range by this time. Not the case and it appears to be the case for 2024 (even though it is an election year). The bottom line is while these rates are not historically high they are higher than what many people have become accustomed to and have budgeted for.
Here is a case study on the impact of interest rates.
A $300,000 home at a 2.35% over 30 years would have paid a total of $418,355 and interest of $118,355.
The same home at 7.25% would pay a total of $736,749 and interest of $436,749. The payment would also have doubled. The cost of that same home would now be at least $400,000 and the interest rate would be closer to 8%. You can easily see how this interest rate is a game-changer for many people.
Did you know that 42% of residential homes in the United States have no mortgage? That leaves a majority of homes (58%) who hold a mortgage – but 90% of current mortgage holders currently enjoy an interest rate under 5% (many under 3%). Hence, one of the major reasons for no inventory. Many people really want to move but simply cannot afford to.
The opportunity of this market is for the all-cash Buyer (believe me there are MANY of them) and any Seller.. Cash wins many times over a higher offer price. The old saying ‘Cash is King’ continues to be a solid truth. There are still multiple offers in almost every home sale but fewer of them. Cash wins almost every time. People with cash are capitalizing on less competition. As soon as interest rates start to tick down we will have an avalanche of Buyers back in the market. We have this moment of uncertainty and cash Buyers are taking advantage of it. Prices are increasing right now but not at the pace they were or likely will again.
US baby boomers hold 1/7 of the world’s wealth. It is being spent right now and will continue to be for a while. Many are investing in additional Real Estate. Most of our Buyers are cash Buyers. Most of our accepted offers are cash. Certain segments of the market are flush with cash and are making moves (literally). Our Sellers are selling their homes at remarkable prices (our strategies and services help this a great deal) and moving to their next chapters. Our Buyers are doing the same. New construction is still going strong for our higher-end builders as people understand the pricing is not going backward.
Many people are also helping their children out at a time in their lives when it can really have an impact versus holding their inheritance until later in life. In our business and all across the country parents are assisting their children with cash supplements on home sale purchases.
Prediction of Future Interest Rates
Will interest rates go down? Now that is the $64,000,000 dollar question and the answer is who knows! All the pundits say not likely in the near future.
Interesting side note that makes sense to me…The Wall Street Journal recently predicted that interest rates will steadily increase as a strategy to pay off the massive debt (stimulus checks, failure to collect student loan payments, etc.) we incurred during the COVID-19 pandemic. This debt has to be repaid somehow, and raising interest rates will aid in achieving that.
Being Smart in the Market
Here’s our take: No one can look in a crystal ball and predict the future with 100% accuracy. However, when we list houses, we still get multiple offers. People still have to move, even if they don’t want to, due to jobs, deaths, divorces, and more. People are also actively ‘Right Sizing’. Real estate doesn’t stop. There are still multiple cash offers on the table, and properties are selling as fast as they get listed (unless they are overpriced).
As mentioned, housing prices will likely continue to rise, not fall. And put this into perspective – interest rates are still lower than the historical average.
Every Real Estate market provides opportunity. Right now that opportunity belongs to the cash Buyer and any Seller.
Was that clear as mud? We’d love to chat further with you, on this topic! Give our office a call and let’s go over your options. We’d be more than happy to advise you on the best possible decision for you and your family. We have these conversations every single day and provide solid plans and wise strategies. We win…A lot.
We also are in touch with the best of the best locally and nationally to be current on all things Real Estate…We LOVE our business and here for you 1000%.