A tale as old as time. The story of the frog and the pot. According to the legend, the frog sees a pot of room temperature water on the stove and decides to hop in. Then the stove is turned on and the water slowly begins to warm up and eventually boil, putting the frog in mortal danger. He doesn’t hop out in time because he doesn’t notice the incremental increase in temperature. In the other scenario, a frog encounters a pot of water that is already boiling on the stove. He jumps in and immediately jumps out to escape the hot water. That frog survives! Now, in today’s housing market, which frog are you going to be? In today’s article we’re going to explore the current real estate market and how you can avoid becoming a “boiled frog” so to speak. Let us know in the comments if you’ve heard that story before or if you have any other questions about navigating today’s tricky marketplace.
The Allure Of The Pot
The pot of water initially this last year was boiling enthusiastically and we could see it from a mile away. Many buyers stopped buying homes en masse aka jumped out of the pot as soon as they spotted danger. The pot is always alluring, but sensing danger, the market was quick to retreat to safety. The increase in interest rates scared away many would-be buyers because it was too drastic of a change, and too quickly to feel comfortable.
Other Factors At Play As Well
According to the National Association Of Realtors (NAR), “many factors are contributing to the undersupply of housing. Builders aren’t building enough homes. Investors have taken single-family homes out of the market for potential homeowners. And some owners are converting homes to short-term rentals rather than selling. But one added factor this year is sellers’ unwillingness to give up their low mortgage rate, Yun said. “They may be thinking about getting a bigger home for their growing family but then deciding: ‘We love our 3% mortgage more than extra room for the baby.’” There are a lot of pieces to the puzzle, and solving it gets harder every year.
Hopping Back In The Cool Pot Water
The pot seems cooler now. Rates have come down slightly BUT buyers have become more comfortable with the “new normal’ for interest rates. We are seeing an increasing number of buyers return to the pot. The hard proof of this is that there have been more mortgage applications in the last few weeks. We are all anxious to see what is coming in the new year with tax refunds as inflation stabilizes. Typically the end of January sees an increase in loan applications as homebuyers start planning their spring/summer move. Buyers are becoming more comfortable with the current mortgage rates and the Fed will likely slow their drastic raising of rates (boiling the frog too fast!) so it’s likely more buyers will hop back in the pot aka the marketplace for now!
For The Road
As we move into the new year, keep in mind that while the future is uncertain, it is always a good time to buy a home right now so you can start accruing equity today rather than tomorrow. You just have to keep looking forward.
Wondering how to accomplish that? Give us a call! We would love to talk to you and to help you along the buying process every step of the way.