While our full 3rd Quarter Market Watch will miss this REcap post, it will be released within the next few days. In the meantime, we’d like to share some updates we have provided to the press about the current market conditions that are impacting our next quarter. We are focused on home inventory, buyer demand and how a rapidly changing mortgage interest rate environment may impact sales in the months ahead.
At the close of the third quarter, the historically high real estate sales pace in Berkshire County in 2021 was not sustainable, with a 5% reduction in the dollar volume transacted so far this year and a decrease of 10% in the number of residential homes sold. Despite this downward sales momentum, the median sale price of homes rose 6%, to $325,000 countywide. It is important to note that in 2019, in January through September sales amounted to $295 million dollars, compared to $456 million dollars this year to date. The 2020-2021 market expansion was significant.
Berkshire County Residential Home Sales
|Chg # Sold||2%||1%||11%||-4%||-10%|
|Chg $ Sold||9%||2%||36%||19%||-5%|
|Avg Sale $||$284,453||$286,301||$351,934||$433,561||$458,294|
|Chg Avg Price||6%||1%||23%||23%||6%|
When looking at the market activity in mid-October of this year, some properties listed for sale are still generating multiple offers, while others we see reporting significant price reductions in the first few weeks of listing. Sellers are faced with a shifting market and cautious buyers. In this rapidly changing market, it’s important for sellers to work with local Realtors who have minute-by-minute access to market data along with unparalleled knowledge of actual Berkshire market conditions to reach their real estate goals.
As the overall US economy struggles, mortgage rates fluctuated greatly in the third quarter of 2022 to try to correct inflationary issues. As Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors said, “Three factors mainly affect mortgage rates in today’s market: expectations on inflation, economic growth and the Fed’s next rate hike. Inflation and higher interest rates typically move up yields as investors demand a higher return.”
The average 30-year fixed rate was as low as 4.99% in Aug. yet was 6.7% at the end of September, according to Freddie Mac. Mortgage rates rose above 7% in October. Freddie Mac and the Mortgage Bankers Association predict the average 30-year fixed interest rate will settle at 5.4% and 5.5% for the fourth quarter, yet the National Association of Realtors forecast 6% by the end of 2022.
For buying power, when borrowing $300,000 at a 7% interest rate, a buyer’s monthly payments would be almost $2,000. At the beginning of 2022, when interest rates were around 3.5%, monthly payments on a $300,000 mortgage would have been just under $1,350. The same loan now costs roughly $650 more per month.
|10-year historical look at residential inventory in September|
While the rising mortgage interest rates are pushing down demand as the Fed had hoped, many buyers see this shift as an opportunity to enter the housing market with a bit of leverage. Contract negotiations resume in a more balanced market and appraisers and home inspectors are carefully analyzing the home’s long-term stability and value.
Despite demand slowing, there’s still a shortage of available homes that makes some properties popular and competitive for interested buyers. In September, there were 614 homes on the market for sale in Berkshire County, compared to 1,759 ten years ago, a 35% decrease. Since 2013, the inventory of homes for sale has continued to fall. The many factors contributing to a decline in inventory include low building rates in our area, a larger population of citizens desiring homeownership, a shortage of optimal living options for active elderly, and investment in real estate has proven to be a sound strategy for long term wealth.
All real estate professionals are urged to make sure their buyers maintain updated preapproval letters from their lender to make sure their price range remains accurate with the latest rates. Now is also an important time to make sure you are aware of the new programs launched by Freddie Mac, Mass Housing (check out the awesome program we offered last month) and local lenders to improve the buyer’s position in the market despite these challenges. There are many options available and getting your buyers connected to and learning about options is an important part of helping them achieve their goals.