Facts and Trends

Market Shifting Due To Rising Mortgage Rates

by Ruhl&Ruhl Realtors

Earlier this month, our Fall 2022 Facts & Trends Newsletter was released. Ruhl&Ruhl CEO, Caroline Ruhl wrote the lead article tackling the topics of mortgage rates and listing inventory. For more market-specific articles you can view our quarterly Facts & Trends on our website

Market Shifting Due To Rising Mortgage Rates

10% fewer properties sold across our region during the third quarter of 2022 compared to the third quarter of 2021. Recall that we are comparing today’s market to the best market ever in 2021 in terms of real estate sales.

Because homes are still appreciating, sales volume was only down 1% during the third quarter, and year to date across our region sales volume is still up 6%. See the activity chart on page 2 for the significant variations from market to market.

“The aim of Fed tightening is to curtail demand in an effort to tame inflation, and when it comes to the housing market, the Fed’s actions are working.” – Odeta Kushi, Deputy Chief Economist, First American. 

It just makes sense that as mortgage rates have risen from 3% to 6.5% and are climbing, some buyers have paused due to affordability and some sellers have decided to stay put in their homes and retain their 2% – 3% mortgages. Basically, it’s true that it costs more to buy a home today than it did last year, but the same is true for renting. This means, either way, a buyer or renter is going to be paying more. The difference is with homeownership, they are also gaining equity over time, which helps grow their net worth. The question becomes “what makes more sense for you?”

Homes Are Still Appreciating In Our Markets

“The root issue of what drives house prices almost always is supply and demand…” – David Ramsey, Personal Finance Personality. Price declines are not expected in our markets given the ongoing supply and demand imbalance and continued strength in the labor market. (See appreciation rates in our various markets on page 2 and over five years on page 4.)

On average over the past five years homes in our region have appreciated by over 30%. Nationally homes have appreciated 63.52%. We are blessed by our slow, steady appreciation year after year in our Midwest markets. It is likely other markets where appreciation went up so quickly, like in Florida, Denver, and Seattle will see depreciation. So when you hear the national media projecting home prices falling it isn’t in our safe, stable markets.

Zillow has projected that 618 MSAs (Metropolitan Statistical Areas) in the country will experience home price appreciation in 2023 and 257 MSAs will see depreciation.

Active Listing Inventory Is Growing

Active listings available to purchase in our region increased 8% from the second quarter to the third quarter this year. “Fall is historically the time of the year when buyers have found the best market conditions to obtain more bargaining power.” – Jiayi Zu, Economist, Realtor.com. Buyers will see less competition for homes and have more time to tour homes they like and consider their options. According to ShowingTime, showing activity is down 8.5% in the Midwest, compared to 22.2% down in the south and 37% down in the west.

Yet it is still a Seller’s Market, as defined by months of inventory, which is less than four months of inventory. Our activity chart on page 2 shows months of inventory by market. Our tightest markets are:

  • Iowa Quad Cities 1.2 months of inventory
  • Illinois Quad Cities 1.3 months of inventory
  • Dubuque Area 1.8 months of inventory

For buyers, that means you have more options but still need to be decisive. For sellers, you may have more competition, but you can still stand out if you work with a real estate agent to price your house right and condition it competitively.

If you’d like to read the entire newsletter or sign-up to receive a quarterly Facts & Trends issue visit our website!

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