Little more than a year ago my clients were getting a 30 year fixed rate mortgage at 3%, a 15 year fixed at 2.5%. Sellers were getting stacks of offers and the most challenging job for a listing Realtor was determining which offer was truly the best for their client, Buyer’s agents were pulling out all the stops to get their client’s offer to the top; full price + with escalation clauses, inspections waived, appraisals waived, free leaseback for sellers for months after settlement… Sound to good to be true?

I guess the Fed agreed because as soon as inflation started becoming the word of the day, the Fed started bumping rates up hoping to slow the worrisome inflation by closing the damper on the real estate rally. Real estate has historically been a benchmark for wealth accumulation and consumer confidence among home owners fueling spending on all levels, creating high demand for both necessities and luxuries. When supply can’t keep up prices rise as we have witnessed in the grocery stores, gas pumps and car dealerships over the last two years.
Is it working? Housing starts, the resale market and loan applications are down to pre-2008 levels nationally which is when the last fan got hit. The stock market has dropped and exuberant home buyers are now crunching serious numbers as they compute monthly payments over the breakfast table. Inventory is still low but we are seeing price drops as sellers understand that realism is setting in and buyers are being much more careful.
Some say the Fed has acted too quickly and has not allowed the first rate hikes to have effect. Some say they should have acted earlier. There are many factors influencing our economy. Some are controllable and others are not.
Interest rates from the Fed are one of the few controls that can be manipulated and we are witnessing the impact on the real estate market in just six months. Inevitably, rates will level and probably even lower for a soft landing at which time the refi business will be the in full swing again.
The overall real estate market needed a re-set. 22% annual appreciation was not sustainable. Changes don’t occur overnight but you can expect buyers to have more choices and more negotiating room soon. There are opportunities in every market. What kind of opportunity are you looking for?
Charlottesville Real Estate
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