April Market Update
Wondering how rising interest rates have affected the real estate market? In this April 22 Richmond Virginia Real Estate Market Update, we delve into the current state of affairs. Despite concerns raised by some, historical data and market indicators paint a different picture. Join us as we analyze the impact of rising interest rates and explore the latest trends in the Richmond metro area.
Diagnosing the Situation: Since the beginning of the year, mortgage rates have experienced a sharp increase, as highlighted by Len Kiefer, Chief Economist of Freddie Mac. It is expected that these rates will continue to rise throughout the rest of 2022, albeit at a potentially moderated pace. The burning question on everyone's mind is whether rising interest rates will slow down or burst the bubble of the residential real estate market. Click baiters and doomsayers have been quick to predict the end of the real estate market, but let's examine the past to gain insights into the potential impact.
Historic Impact of Rising Rates on Home Prices: Looking back at six historic periods when interest rates rose by more than 1%, we observe that home prices continued to appreciate in all instances, often outpacing the rate hikes. This historical data suggests that rising interest rates alone may not be enough to significantly impact the real estate market's upward trajectory. Furthermore, it is worth noting that during these six periods, the supply of inventory ranged from 8 to 19 months, whereas currently, we are experiencing a historically low inventory of just 0.5 months.
Richmond Metro Numbers: In the Richmond metro area, the median sales price has continued to rise in March, indicating a strong market. Additionally, the number of sales has also increased, suggesting sustained demand. The median percentage of list price remains favorable for sellers, while the average days on market have remained consistent at 6, indicating a quick turnover of properties.
Personal Opinion: Not So Sure This Is the End of the Housing Market: Considering the historical data, it is not conclusive that rising interest rates will spell doom for the housing market. The current market conditions, coupled with the upcoming spring market, indicate continued competitiveness and potential growth. However, caution is advised, and both buyers and sellers need to navigate the market strategically.
Upcoming Spring Market: As we enter the spring market, new listings are on the rise, providing some relief for buyers. However, the months' supply of inventory (MSI) is not significantly moving, suggesting that new listings are being absorbed rapidly. This trend could make the upcoming spring market one of the most competitive in recent history.
Tips for Sellers:
- If You Have to Buy, Buy First: Secure a new property before listing your current one to avoid being caught in a seller's market with limited options.
- Selling As-Is Is an Option: In a competitive market, consider selling your property as-is to attract buyers and expedite the selling process.
- Do a Delayed Review of Offers: Extend the review period for offers to give yourself ample time to evaluate and potentially negotiate better terms.
Tips for Buyers:
- Bring the Inspector to the Showing: To gain a competitive edge, bring a home inspector along during property showings to identify any potential issues upfront.
- If You Don't Have Cash, You're Not in the Game: In a tight market, having cash or a strong pre-approval letter is crucial to stand out among other buyers.
- It's Still Better to Buy Now vs. Later: Despite rising interest rates, buying sooner rather than later may be more advantageous, as home prices continue to appreciate.
Conclusion: While rising interest rates have garnered attention and concern, historical data suggests that they may not be the sole