Real estate market: The good news and the bad news


Lisa Y. Shaw Broker Associate 508-826-7661
Lisa Y. Shaw
Broker Associate
[email protected]

As the correction begins to slow the national increase in home prices …we all knew it would come to this and so it starts.

The first publicly obvious sign that the real estate market has begun to correct itself — the sudden and drastic increase in mortgage rates. In August of 2021, the interest rate for a 30-year fixed was at an all time low of 2.65%. Now, only 8 months later, the rates have risen to 5.8% varying on the lending institution and the credentials of the borrower.

This is a faster rise in interest rates for mortgages that the industry has seen in its history. We haven’t seen these kinds of numbers for mortgage rates since 2018 when we ended the year at 4.94%.

So do you want the good news or the bad news first? The bad news you say? The rates are expected to continue to rise this year. The Federal Reserve raised the target fed funds rate at its March meeting and is expected to raise them at each of their 6 remaining meetings this year. While the Federal Reserve doesn’t actually set the mortgage interest rates, its policies and actions closely correlate with mortgage rate fluctuation.

With economic activity and employment activity strengthening, many believe this is exactly what the Fed needed to do in an effort to control inflation and correct the supply and demand imbalances.

Still waiting for the good news? Well don’t despair. While rates are expected to increase several times this year, the increase isn’t expected to be in a straight line upward! There will be many fluctuations and rates will change week to week in many cases and are expected to settle somewhere in the mid 4’s. So no need to panic; home buyers who can’t afford the higher rates will have to be patient and time it right, but at least they won’t be priced out of the market.

Sellers too for the first time in a couple years will likely start to see less offers and more buyers holding off in periods of time when rates are higher.

The good news for them too, although home prices are expected to see a 10-15% correction by the end of 2023, is that it isn’t going to be a major crash like we saw in 2008-2009 but rather a slower and steadier rate over the next 18 months.

All in all, the change in the real estate market that’s expected this year should be a positive change for most involved.

A market as frantic as we’ve seen for the last few years is stressful and dangerous; it often leads to rushed decision making, bad financial decisions and a whole lot of remorse. This year’s changes should help the imbalance start to flatten out and prove to be a positive, welcome change to the past few years.

For more information, feel free to call, email or text me at [email protected], 508-826-7661.