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In Part 2 of the June Real Estate Market Update, Ben explains why and how the Jackson, Michigan market is changing in a BIG way, and forecasts what buyers and sellers will experience in the next several months.
Economic Factors Influencing the Market Now
Interest Rates have risen 2 percentage points over the last six months. It is understood that for every rate increase of 1%, the purchasing power of buyers decreases by 10%. So, if at the end of last year before interest rates began rising, you were searching for a $300,000 home, your top price is now $240,000 if you are financing the entire purchase. This is happening at a time when home prices are continuing to rise.
Inflation, especially in gasoline and grocery prices, is impacting buyers. These two line items typically comprise 10-15% of a family budget. With inflation, they eat up closer to 20-25%, a significant amount of income that is no longer available for a home purchase or mortgage payment.
The average American received a 6% raise in the last 12 months, but with inflation at 8%, that extra income is wiped out.
What Can Buyers Expect?
Because of the current economy, there are fewer buyers in the market, so there will be less competition per listing in general. We're already seeing this, as explained by Jake in Part 1 of this update.
If you are financing most or all of your purchase, you'll need to adjust your expectations to accommodate the effects of rising interest rates and inflation. Your purchasing power has decreased.
In case you are waiting for a housing price crash, we are NOT forecasting a housing bubble or the feared burst that follows. Preceding such an event, housing inventory would need to be as much as 10 times our current inventory.
Right now is a good time to buy, because
the spring feeding frenzy has stopped,
there is less competition, and
housing prices are not expected to decrease.
Our market is inching closer to balance, when there are enough houses on the market for buyers. We're not balanced yet, but we're getting there!
What Can Sellers Expect?
Sellers, adjust your expectations. Most homes will sell at or slightly above asking price to a high-quality buyer. In the recent past, almost no homes needed a downward price adjustment, but in the last month, we've seen 19.1% of homes adjust downward before closing.
A highly skilled REALTOR® will help you price your house perfectly for a timely sale at top dollar. Talk with us today about a winning strategy that fits your unique house, your specific neighborhood, and the current local market.
Works cited
https://www.nar.realtor/blogs/economists-outlook/instant-reaction-mortgage-rates-june-2-2022
https://www.youtube.com/watch?v=gh6E5HerxIo
https://www.youtube.com/watch?v=DP9gXCcf7U4
https://www.youtube.com/watch?v=XFDaPyOVvXs
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