It's official, the housing market is beginning to correct.
With interest rates on the rise, inventory following the same trajectory, and demand dropping, “where exactly is the market headed?", is biggest question looming in the minds of all consumers, buyers and sellers alike.
In today’s discussion we will review some key highlights of the national real estate market and project where the Monterey Peninsula market is headed.
National news:
- Last month, April 2022, 61% of home offers faced a bidding war — when an agent reported at least one competing bid — down from 63% in March and 67% a year ago on an adjusted basis, according to a recent Redfin study. (Less Bidding Wars)
- Mortgage applications to purchase a home dropped 12% the week ending May 13 of 2022— the latest data available from the Mortgage Bankers Association (MBA) — from the previous week. The activity was 15% lower than a year ago. (Less Mortgage applications = less buyer demand)
Where is the Monterey Peninsula Market headed?
The Monterey Peninsula Market is beginning to cool off, it is difficult to say to what extent as data trends have yet to reveal anything noteworthy. However, as someone who is in the field of the Monterey Peninsula Real estate market everyday, I can say the overall sentiment is changing. Between buyers and sellers it seems to be more of a fair playing field. In recent history buyers would have to waive just about all contingencies including inspections, just to procure contract. Those days seem to be gone, as we are no longer seeing multiple bids on any given home.
Interest rate hikes have had the biggest impact on the entry level markets. Most sub $1M inventory is seeing the biggest slow down. With less showings this segment of the market is really beginning to cool off.
With buyers having been pushed to their limits over the last two years due to high demand, low interest rates, low inventory, and climbing prices; with interest rate hikes it appears as though many have jumped out of the market now that money is more expensive to borrow.
My Opinion
The market will continue to cool off in the coming months. With market sentiment beginning to shift its hard to foresee property values continue to rise.
Buyers affected by increased interest rates will slowly adjust and re-enter the market as prices begin to level off and demand slightly dips.
We are headed to a more fair playing field where buyers and sellers can express equal leverage.
This is a good thing. Many sellers have wanted to move over the last several years and needed to sell their home to do so. With how quickly the market was moving it made that nearly impossible. This is one scenario which I believe dramatically affected inventory over the last two years.
I believe we will begin to see more inventory, and more complex transactions.
BOTTOM LINE
Despite buzz worthy national headlines, the housing market is still strong and headed in a more healthy direction.
