How will rates affect home prices?
As a Realtor in the Denver market, I track where our markets numbers are on a daily basis. With the rise of rates, home prices have fallen, just like most places. I'm not so curious on where rates will go, because nobody has a crystal ball. More so the affect on the market of potential falling rates.
For example, rates dropped yesterday. The likelihood of home prices or the market changing because of a small drop is likely not very much. At what rate percentage could we start to see home prices going back up? And if they do, by how much? It seems the equity growth we've seen over the last 2 years was unprecedented. Can that continue? Or, if rates drop just slightly, do we simply see a more balanced market and home prices plateau for a while?
Prices in Denver are up 8.5% year over year. Doesnt look like theyve fallen to me.
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Rates will put downward pressure on home prices but there's still a major housing shortage and people have locked in, low interest debt (mostly) so there's no need for most to sell. Thereby, new listings are way down which puts a cushion underneath house prices. They're down some (at least MTM, not year over year yet) and that will likely continue, but it will be far from a crash.
@Kenny Smith
Historically rates have had little impact on home prices believe it or not.
My guess is you won’t see YoY pricing drop until next June time frame while MoM will stay flat or slightly negative (depending on market).
Remember real estate is illiquid and does not react quickly to changes.
Quote from @Russell Brazil:
Prices in Denver are up 8.5% year over year. Doesnt look like theyve fallen to me.
They've fallen from the highs of earlier this year. The only reason they haven't plummeted is because our supply is still low.
Quote from @Matt M.:
Quote from @Russell Brazil:
Prices in Denver are up 8.5% year over year. Doesnt look like theyve fallen to me.
They've fallen from the highs of earlier this year. The only reason they haven't plummeted is because our supply is still low.
Isnt that normal? It is in most of the country that prices peak in q2/q3 then soften in q4. Happens in rising interest environments, happens in falling interest rate environments. See in the chart a little downward bump every 4th qtr.
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Real Estate Agent Pennsylvania (#SBR005765 ), West Virginia (#WVA230040225), District of Columbia (#BR200201381), Maryland (#648402), Virginia (#0225219736), and Delaware (#RA-0031082)
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Anything north of 6% is going to limit transactions. I suspect rates in the 5s would drive a more "normal" market.
Prices a year ago are totally irrelevant...that was a different world.
Okay, there's my totally worthless prediction (except for the comment about the YoY price change).
Quote from @Russell Brazil:
Quote from @Matt M.:
Quote from @Russell Brazil:
Prices in Denver are up 8.5% year over year. Doesnt look like theyve fallen to me.
They've fallen from the highs of earlier this year. The only reason they haven't plummeted is because our supply is still low.
Isnt that normal? It is in most of the country that prices peak in q2/q3 then soften in q4. Happens in rising interest environments, happens in falling interest rate environments. See in the chart a little downward bump every 4th qtr.
April was the peak, and they've fallen 10% since then. Correct me if I'm wrong, but that doesn't seem normal to me.
Quote from @Mike Dymski:
Anything north of 6% is going to limit transactions. I suspect rates in the 5s would drive a more "normal" market.
Prices a year ago are totally irrelevant...that was a different world.
Okay, there's my totally worthless prediction (except for the comment about the YoY price change).
Haha, thanks for your input! I would probably agree with that, but I guess we'll just have to wait and see!
Quote from @Kenny Smith:Actually looks like each of the last 3 years prices dropped about $50k later in the year in Denver
Quote from @Russell Brazil:
Quote from @Matt M.:
Quote from @Russell Brazil:
Prices in Denver are up 8.5% year over year. Doesnt look like theyve fallen to me.
They've fallen from the highs of earlier this year. The only reason they haven't plummeted is because our supply is still low.
Isnt that normal? It is in most of the country that prices peak in q2/q3 then soften in q4. Happens in rising interest environments, happens in falling interest rate environments. See in the chart a little downward bump every 4th qtr.
April was the peak, and they've fallen 10% since then. Correct me if I'm wrong, but that doesn't seem normal to me.
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Real Estate Agent Pennsylvania (#SBR005765 ), West Virginia (#WVA230040225), District of Columbia (#BR200201381), Maryland (#648402), Virginia (#0225219736), and Delaware (#RA-0031082)
- (301) 893-4635
- http://www.DistrictInvest.com
- [email protected]
- Podcast Guest on Show #192
Asking price to sold price is 99% in my area - tons of price reductions but values are up YOY. I find YOY closed prices to be the most important to track… so often asking price is wishful thinking for sellers, especially now, and yes they are humbled there but not having to come down drastically.
- Investor
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We won't see the same type of growth we saw last year. Depends on which market you're in, but I anticipate tons of short sales. Am seeing more and more people trying to sell who over paid for property and have negative equity
Quote from @Russell Brazil:
Quote from @Matt M.:
Quote from @Russell Brazil:
Prices in Denver are up 8.5% year over year. Doesnt look like theyve fallen to me.
They've fallen from the highs of earlier this year. The only reason they haven't plummeted is because our supply is still low.
Isnt that normal? It is in most of the country that prices peak in q2/q3 then soften in q4. Happens in rising interest environments, happens in falling interest rate environments. See in the chart a little downward bump every 4th qtr.
We do have seasonality, which is reflected in your data, however what we are seeing on the ground here is more than seasonality. It's dropped quit a bit more.
The interest rate spike hasn't been a full year. Recalculate that for half a year.
@Kenny Smith - Generally, higher interest rates cause home prices to drop but here within the Chicagoland area, home prices have remained near the top with a few drops here and there to lure buyers in this "sellers" market.
Overall from what I have seen in the past year with constant rate hikes, sellers' agents have dropped prices slightly to get offers and start a bidding war. I think Q1 of 2023 will be telling of how rates are impacting home prices as the market has cooled down from a home sale perspective and rates have stayed steady near 6.5%
- Rental Property Investor
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"No one has a crystal ball" I guess, but this generation of the Fed is pretty clear about its predictions and intent. Rates went down recently in part because the market had priced in a slight slowing in increases and they had already baked in a large increase (.75 to 50%). Not a decrease in rate of rise is not the same as a decrease in rate.
Read the minutes for their take. They publish them 14 days after the meeting. Not riviting but useful. Since the same people who author the minutes control the short term rate, its pretty directionally clear both what they intend to do and what criteria they are using for their decisions.
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that should read "note, a decrease in rate of rise is not the same as a decrease in rate"