What contributes to slower real estate market sales?
Interest rates, seller expectations and the reality of the market
High interest rates and high seller pricing expectations contribute to slowing real estate market sales
Sales in the real estate market are affected by many different elements. Supply and demand, capital flows, and interest rates all play a significant role in determining real estate sales.
Currently, high interest rates and high seller expectations are the primary elements that are slowing down real estate transactions. This is particularly true in Grand Rapids, MI, where the recent growth in real estate transactions laid the foundation for higher interest rates moving forward. On the national scale, real estate sales dropped by 13% from last year. And in Michigan, mortgage interest for a 30-year loan currently stands at 4.57%. With these current trends, what lies ahead for real estate market sales?
How rising interest rates are slowing down real estate sales
The jury is out with the evidence; rising interest rates are causing buyers to shy away from buying property. Figures from the U.S Census Bureau show that home sales dropped by 13% since last year. This is primarily because of the rising interest rates in both local and national markets.
But how do interest rates affect real estate sales? When interest is higher, financing options (such as mortgages) become more expensive. A 30-year mortgage can cost thousands of dollars more when the interest increases by just a few points. As a result of higher rates, buyers are waiting on the sidelines to see if the rates will eventually drop moving forward. Higher interest rates have been attributed to actions by the Federal Reserve (to limit mortgage-backed securities) and limited properties in the market.
As you would expect, high demand leads to higher home prices. This is the current situation in Grand Rapids. The vibrant real estate market here has led to a spike in demand and thus higher interest rates. And on a national level, interest rates are expected to soar further upwards in the upcoming year.
Seller prices
Whenever a particular real estate market is hot, sellers look to make higher margins. A single seller may receive multiple offers and thus he/she may increase the price to get a better deal. These high seller pricing expectations have had the effect of slowing down real estate market sales. Sellers are now introducing their properties at high prices, causing buyers to test the waters with caution.
As if the higher interest rates are not already of concern, high seller prices are also causing buyers to think twice before making a purchase.
Moving forward, sellers (particularly those in Grand Rapids) may just outbid all interested buyers and adjust their prices downwards. Indeed, as more buyers hibernate from looking for homes or applying for mortgages, sellers might find themselves stuck with a listing for a longer period than desired. This may cause prices to adjust downwards and real estate sales to slowly pick up.
Navigating this complex market is never easy alone. The professional real estate agents at the Sprich Group in Grand Rapids, MI work with both buyers and sellers to ensure market fit pricing that moves homes quickly and help buyers to find the right homes for their needs and budget.
