What The Housing Market Correction Means For Home Buyers
The real estate market finally appears to be cooling off. There is more inventory on the market, and we’ve started to see some sellers reduce their prices. Buyers have some negotiation power again, which is a big deal since buyers have had none for the last two years.
If you’re in the market to purchase a home, what exactly does the housing market price correction mean for you? Well, maybe not as much as you’d hoped for. Let’s discuss.
What Is Causing The Price Correction?
The main reason for the real estate price correction is the rise in interest rates. As you know, interest rates have doubled since the beginning of the year. While interest rates are still low in the grand scheme of things, that increase makes a huge difference to a buyer’s monthly mortgage payment. Many buyers were already pushing the limits of their budgets, and this increase in interest rates has made them decide to take a break from home shopping.
According to money.com, mortgage loan applications have dropped 17% compared to the first week of July 2021. Since there are not as many buyers, the homes on the market are sitting for a longer period, which eventually leads to sellers lowering their asking prices.
Does The Price Correction Mean A Lower Monthly Mortgage Payment?
Sadly, even with the price correction, monthly mortgage payment have not decreased. Again, this can be attributed to rising interest rates. The increase in interest rates has increased the monthly mortgage payment by hundreds of dollars. CBS News discusses how the rise in interest rates has left home buyers feeling even more frustrated. Yes, prices are beginning to level off, and we aren’t seeing the explosion in values we have gotten used to in the last two years, but that doesn’t mean housing has become more affordable.
Home prices will need to drop significantly to get the monthly mortgage payment amount back to where it was before the rate hike. Unfortunately, that does not look like it will happen. So, while buyers may have more options regarding homes available, and won’t have to forgo an inspection or appraisal contingency to get their offer accepted, buyers should not expect to save any money on their monthly mortgage payment.
Need Help Navigating This Market?
We know the real estate market of today is confusing. If you have questions about mortgage loans and buying a home, please don’t hesitate to ask us. While we may not be able to predict the future – nobody can – we can help guide you through this market and help get you the financing you need to purchase a home of your own.
Contact us to discuss your real estate goals, and let us help you put a plan in place to reach them. We look forward to working with you!