Homebuyers Adjusting to the New Normal

Before you decide to sell your home, it’s important to understand what you can expect in the current housing market. One positive trend is that homebuyers are adapting to today’s mortgage rates and accepting them as the new normal.

To better understand what’s been happening with mortgage rates lately, the graph below shows the trend for the 30-year fixed mortgage rate from Freddie Mac since last October. As you can see, rates have been between 6% and 7% pretty consistently for the past nine months:

According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), mortgage rates play a significant role in buyer demand and, by extension, home sales. Yun highlights the positive impact of stable rates: “Mortgage rates heavily influence the direction of home sales. Relatively stable rates have led to several consecutive months of consistent home sales.”

As a seller, hearing that home sales are consistent right now is good news. It means buyers are out there and actively purchasing homes. Here’s a bit more context on how mortgage rates have impacted demand recently.

When mortgage rates surged dramatically last year, escalating from roughly 3% to 7%, many potential buyers felt a bit of sticker shock and decided to hold off their plans to purchase a home. As time passed, that initial shock has worn off. Buyers have grown more accustomed to current mortgage rates and have accepted that the record-low rates of the last few years are behind us. As Doug Duncan, SVP and Chief Economist at Fannie Mae, says: “…consumers are adapting to the idea that higher mortgage rates will likely stick around for the foreseeable future.”

(“Higher” is, of course a relative term as many of us still remember rates of 14-15% and would have dismissed the suggestion of rates between 6-7% as total fantasy.)

A recent survey by Freddie Mac reveals 18% of respondents say they’re likely to buy a home in the next six months. That means nearly one out of every five people surveyed plan to buy in the near future. And that goes to show buyers are planning to be active in the months ahead.

Of course, mortgage rates aren’t the sole factor affecting buyer demand. No matter where mortgage rates stand, people will always have reasons to move, whether it’s for job relocation, changing households, or any other personal motivation. As a seller, you can feel confident there is a market for your house today. And that demand is pretty strong as buyers settle into where rates are right now. 

Bottom Line

In our interactions with buyers, we’ve seen less comment and concern about interest rates as the year has gone on. The key for homeowners is to appropriately price their property. Buyers are not in a panic as they were two years ago. Most are in a position to pass on a home that needs substantial work and is overpriced. That would not have necessarily been the case in 2020-21.

Thinking about what you should do next? Let’s connect at 508-360-5664 or [email protected] to discuss your options.

We’re looking forward to participating in a webinar later this morning with Steve Harney, the country’s leading real estate economist. His topic will be the market for the last 18 months and why certain buyers and sellers are feeling a degree of angst that the economic statistics really don’t support. We’ll pass on his thoughts..

Mari and Hank