Market Update

Real estate agents are very often asked how the real estate market is doing. The bottom line is that it is still a seller’s market, but there is some positive news for buyers as well.

 

As of the writing of this editorial, Freddie Mac reports that the interest rate for a 30-year fixed is 7.12%. Rates a year ago were 5.89%. Also notable is that 35% of homes are going for more than the asking price, with the typical seller receiving three offers. Demand is still active in the housing market despite higher rates, and this is true in the Granite Bay market as well.

 

Many real estate economists predict mortgage rates could come down in the coming weeks, depending on the Federal Reserve’s next move. However, Sam Khater, Freddie Mac’s chief economist states, “recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes.”

“The recovery has not taken place, but the housing recession is over,” says Lawrence Yun, chief economist for the National Association of Realtors (NAR). The fact that there are so many multiple offer situations implies that housing demand is not being satisfied. Housing inventories remain at historical lows, down 13.6% from even last year’s low levels.

In Granite Bay, the number of homes for sale in August was 36, down 23.4% compared to July, and down 47.8% compared to the same time last year. The actual number of sales that closed in Granite Bay in August was 25, which is an 8.7% increase from July but down 13.8% from last year. Overall, it is clear that inventory is tight in our area as well as nationally.

Homebuyers may find some relief soon, as mortgage rate increases may be mostly over. “With consumer price inflation coming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out,” Yun says.

The Federal Reserve has been working hard to lower inflation since early 2022. A lowering of inflation would be significant because, historically, there has been an apparent connection between inflation and mortgage rates. 

This graph from Freddie Mac shows a relationship between inflation and mortgage rates. Each time inflation moves significantly (blue line), mortgage rates follow soon after (green line). The red oval marks the most recent spike in inflation, with mortgage rates following closely behind. As inflation has moderated a bit this year, mortgage rates have yet to make a similar move. If the historical trend continues, the market can expect mortgage rates to follow inflation downward.

NAR forecasts that the 30-year fixed-rate mortgage could reach 6.4% by the end of the year, followed by 6% in 2024. Even with today’s rate of 7.12%, mortgage rates are still below the 52-year average of Freddie Mac’s tracking of 30-year fixed rates. So while there is no crystal ball in real estate, things could be moving toward a bit more of a balanced market.

Debbie Austin is a realtor associate with Keller Williams, Roseville and has been helping clients buy and sell property in the area for 19 years. If you have a specific real estate question you wish to see addressed, contact Debbie at (916) 223-8144 or visit debbieaustinrealty.com.