ReCasa Financial Blog

In early 2022, the prices of homes were continuing to sky rocket. Affordability was a concern for many as prices soared with no end in sight. Since then, interest rates have increased and an inflationary environment has settled in. Even so, today’s real estate market is far better equipped to withstand itself than in 2007 when similar circumstances arose. 

A more “even” field has arrived in the recent month, with buyers and sellers on more equal footing from a leverage standpoint. According to NerdWallet, the average interest rate on a 30-year home loan was 3.1% at the beginning of 2022. Now, these mortgage rates have risen to 6.2%, the highest since 2008. Predictably, with this increase, there is a decrease in the number of mortgage applications.  Purchase applications saw a 16% dip in June from the year prior, and refinancing applications saw a 70% decrease from the previous year.

Properties are also tending to stay on the market longer.  Some sellers are now taking offers below asking price in order to get their properties off the market. Since April, homebuyers are seeing a slight dip in the sale price they are expected to pay. This dip still keeps the price higher than home prices a year ago.

The number of new builds continue to decline. It is at the lowest it has been in 2 years.

According to CNN.com, with the decrease in home sales, some realty companies are starting to lay people off. With not as much inventory, they do not need an abundance of realtors.  

Inflation is seen everywhere right now. As real estate investors, I am sure that you have noticed that the price of rehabbing supplies has increased from a few years ago.  A rehab budget of $50,000 a year ago, may well be $60,000 now, squeezing profit margins and causing investors to avoid overpaying for a property.

With all of these economic changes in the past few months, what changes do you foresee in the next few months?