We are in what we can call the Black Friday of real estate deals, but it doesn’t seem like projections of homebuyers will materialize this spring.
Almost every year, homebuyers look forward to getting a fair deal on home prices during spring. However, they are in for surprises this year as the high mortgage rates persist. Interestingly, experts say it may go even higher.
The Real Estate High Traffic Season
Real estate agents often record upticks in the volume of deals they seal during spring. Many factors have been attributed to this, but the blossoming aura of nature after winter seems to be a prominent reason.
According to Melissa Cohn, the regional vice president at William Raveis Mortgage, “The weather is warmer, there is more daylight, and homes always look better once the greenery returns from winter.”
Factors that Influence Home Sales in Spring
Another factor holds more sway with parents who have school-going children. These parents would rather buy properties and change residences at times that would cause minimal disruption to their kids’ education.
So, what homebuyers in this category do is to scout for a property at the beginning of spring, close the deal by the end of the school year, and move in the summer.
The Federal Reserve Forges On Undaunted
However, inflation is not showing signs of flagging anytime soon. In contrast, the Federal Reserve continues to wield all the financial policies it can to keep inflation in check. One means of achieving this is fixing mortgage rates and driving them higher as inflation grows.
So far, the central bank has been trying to keep the inflation rate at a 2 percent cap.
Inflation’s Still Going At Full Steam
Unfortunately, the inflation rate grew by 3.2 percent in February relative to that same period in the previous year. This eliminates any hope that mortgage rates would ease up in spring.
Meanwhile, there is a huge demand for real estate, as large swaths of homebuyers are standing by the sideline, waiting for mortgage rates to improve.
Several Forces Working Against the New Homebuyer
In early March, mortgage rates lingered around 6.88 percent, spurring a wave of loan refinancing among homeowners. However, home prices remain at an all-time high across the US, thanks to the housing shortage.
The situation is not likely to improve soon. As Danielle Hale, chief economist at Realtor.com, said, “Mortgage rates are likely to top 7% again for a brief period.”
The Prevailing Realities Determines the Feds’ Stance
Hale feels the Federal Reserve may postpone reducing interest rates until around September. Naturally, this will drive up mortgage loan rates and affect the volume of deals in what real estate brokers have always known to be peak season: spring.
Still, Hale wonders if the fixed and high rates of the Feds would effectively rein in the onslaught of national inflation.
Experts Speak on the Potential Outcome of Spring Sales
Hale affirms that the Federal Reserve’s regulations go beyond what works best for the real estate industry and instead include policies that would yield the best results for the nation.
Though Hale said it’s not likely that the Feds will increase interest rates, she feels it is still possible. She said during an interview, “I don’t really think they’re going to raise rates. But I do think that question is now on the table.”
Hot Deals in Spring
The founder of PNW Residences, Chris Reis, shares a similar opinion with Hale about the real estate market’s outlook for the year.
Reis, whose business is based in Washington, said of the annual real estate sales peak, “Spring is a hot market for buyers as sellers typically wait until now to list their homes to avoid the slower winter months.”
Spring Transactions Impact Real Estate Prices
Reis further explained that before the onslaught of inflation, the trend during the spring real estate boom resulted in increases in the inventory.
Similarly, this spring spike in real estate transactions is a precursor and determinant of the cost of properties in the following months. Summarily, the price of housing in summer is determined in spring.
New Listings Offer Fair Deals
Alan Chang, president and founder of Vested Title & Escrow, says homebuyers should look forward to exciting bargains this spring due to the low inventory that characterizes new listings.
However, Chang also does not see rates easing shortly. He said, “With inflation continuing its upward course, it seems like the Fed will not be dropping rates in the immediate future.”
How the Effect of Inflation Varies from State to State
While the housing shortage is peculiar to all of the United States, it is biting in some states more than others. Reis cites Seattle as an example.
Seattle is facing a double-pronged fork. First, real estate shortages are prominent in the state, naturally driving the price of the few available properties high. Second, there is the looming menace of inflation-driven mortgage rates.
Price, Not Mortgage Rates, Should Be a Quality Assurance Parameter
Reis, however, advises intending homebuyers not to be dissuaded by rising mortgage rates. He opines that buyers should be more concerned about the pricing of the property they are buying than the imposing rates.
Reis said, “It’s in their interest to purchase homes before pricing increases as you marry the purchase price, not the rate.”
Rates Are High; Buy That House Nonetheless
A prolific real estate broker, Cody Horvat, also thinks buyers should proceed with their home purchase irrespective. However, Horvet, who works with The Scott Group, has a caveat.
“Buyers still hoping to purchase a home this spring should sit down with their lender and strategize on how best to handle the potential increase in mortgage rates,” said Horvet.
You Can Win In Rough Weather
Horvet believes it is a win-win situation for whoever courageously proceeds to buy real estate this spring. Yes, there is no denying that rates are unbearably high.
However, since economic indications point to a potential increase in the fixed mortgage rate, homebuyers can still get a good bargain on their gamble in the near future.