LOS ANGELES — The U.S. housing market is slowing as would-be buyers struggle with rising borrowing costs and a persistent shortage of properties for sale.
Previously occupied home sales fell in February and March as mortgage rates shot up, crimping homebuyers’ purchasing power during the annual spring homebuying season.
The average weekly rate for a benchmark 30-year mortgage slipped last week to 5.25% from 5.3% the previous week, which was the highest level since 2009, according to mortgage buyer Freddie Mac. A year ago the average rate was 3%.
Nick Bailey, president and CEO of Re/Max, a global network of independently owned and operated real estate brokerages with about 3,300 locations in the U.S. alone, recently spoke to the Associated Press about the impact rising mortgage rates will have on the housing market this year, from less competition among home buyers to more muted selling price increases.
The interview has been edited for length and clarity.
Q: What impact is the surge in mortgage rates this year having on the housing market?
A: The number one thing it has done is it’s started to help price appreciation stabilize a bit. Obviously, the big talk the last couple of years is how much home prices have increased with most markets across the country in some level of double-digit growth. I think the rise in interest rates is going to help buyers not be in as strong a competitive bidding situation as they have in the past. I think it will stabilize pricing and overall help the market return to a little bit more of an equilibrium, which I think is needed. The market could not continue to go up by double-digit price appreciation year after year after year.
Q: One thing that could help buyers is more homes on the market. Are you concerned that homeowners with an ultra-low, fixed mortgage rate may be reluctant to sell if they’d face a higher mortgage rate when financing their next home?
A: I don’t necessarily think there’s a correlation that exists between the mortgage rate and the inventory that comes on the market. We’ve been through a number of cycles during many decades. We sold houses in the ’80s when interest rates were 18%. Even though we’ve had an uptick in interest rates, they’re still overall historically low.
Q: It’s been a sellers’ market for so many years, do you see that tipping in favor of buyers anytime soon?
A: We have a shortage of homes. We have pent-up demand. I think this is going to be fairly slow to transition to a buyers’ market, but I don’t think we’ll necessarily hit a full buyers’ market because of the shortage and the demand. It started off to be a much hotter year in the industry than most anticipated, but I do think that in the second half of this year we’ll start to see inventory levels go beyond just one month. I think we’ll start to get to between two and three months of inventory by the end of the year, with the stabilization of both prices and interest rates. I think that’s what we’re going to see, not a buyers’ market by the end of the year, but maybe a little bit more equilibrium.
Q: What advice would you give first-time buyers in this market?
A: At this stage of the game in this market, first-time homebuyers have to be patient. The absolute key when I have seen first-time homebuyers win is when they’ve got a good agent who knows how to navigate the market, knows how to present a really good, compelling offer to the seller. And they need to realize that they may not get the first, second or third home that they make an offer on. They’re going to have to be willing to possibly sacrifice location, maybe go a little farther than they want.