May Gray has shifted into June Gloom with an overcast forecast for Real Estate. What is being deemed as the “Summer Slow Down” in Real Estate has been in full effect since June 2022. My forecast is that the market will continue to be in favor of Sellers, but at a different pace.
First, the good news:
- Home prices rose by 1.8% in May and 20.2% on a year-over-year basis according to CoreLogic’s recently released Home Price Index Report
- The Median Home Sales Price was up 14.1 % to $1,084,000 for detached homes and up 19.3 % to $699,000 for attached homes in North County according to North San Diego County Realtors (NSDCR)
Home prices are not falling as some have feared. They are holding steady, bolstered by the rapid increase in home values over the past 18 months. The rapid equity you have gained in your current home will remain.
Now the bad-ish news:
According to the NSDCR HomeDex Market Statistics Report for June 2022, we have experienced the largest interest rate hike since 1994. Mortgage interest rates were at 3.25% at the start of this year and then they quickly jumped to 5.5% on Thursday, June 9th and then 6.28% on Tuesday, June 14th.
The rising interest rates are a result of the Federal Reserve trying to quell inflation which reached 8.6% as of last measure in May.
Even though a 6.28% interest rate isn’t historically high, it’s been a long time since we have seen rates like this and they have already impacted the housing market this year. Higher home sale prices, coupled with 30-year fixed mortgage rates approaching 6%, have exacerbated affordability challenges and rapidly cooled demand, with home sales and mortgage applications falling sharply from a year ago.
So, what does this mean?
The Seller’s Market will prevail, but homes will experience more Days on Market (aka take longer to sell) than we have become accustomed to over the past 17 months. NSDCR reports an increase of 8.3% Days on Market (DOM) for detached homes and 22.2% for attached homes. This resulted in less homes sold in the month of June: home sales in North County San Diego decreased 39.5% for detached homes and 21.8% for attached homes.
In March and April 2022, homes prices were set based on the last home sale in the neighborhood and comparison reports became obsolete. If a home sold for $1.2M, the next home on that street would list at $1.2M and probably sell for $1.4M, setting a new threshold and setting up the next home sale to exceed $1.4M.
The June Gloom of rising interest rates is creating a new pace for home sales. Instead of the rapid increase of home sale pricing, we may see (the already inflated) home prices reduced by small amounts in order to attract buyers who are feeling the challenge of increased interest rates.
If you are a Seller or considering selling, stay the course. Your home will sell, but it may take longer to do so. List prices are becoming a more realistic sale price, unlike in the past when the list price was the starting bid amount. New marketing and positioning techniques are going to be required of Listing Agents to get the best price for your property. I have a few ideas in my back pocket that I am ready to employ.
If you are a Buyer, you have a little more buying power now. With homes being on the market longer, Sellers are going to be more amenable to the terms you offer. Cash will continue to be “King” because it can leap frog the challenge brought on by rising interest rates. If you are financing, there is good news on the horizon. Check out this 2-minute video for the details. I can walk you through the lending process to garner the best loan for your individual needs.
The June Gloom clouds will begin to dissipate as we discover the rhythm of the new pace of the Real Estate market.
Interested in selling or buying in the June Gloom Real Estate Market? Give me a call! 858.531.5390
