December 2022 Real Estate Market News
With less competition and more homes to choose from, this may be the best time to purchase a property. The FED’s drive to harness runaway prices looks to be coming to an end. With so many people on the sidelines, there are opportunities available now that may not be available in 2023.
Mortgage rates have held steady at around 6.63% even while the FED is expected to raise the prime rate on Wednesday. Because the demand for mortgage applications fell, lenders are becoming more competitive. They don’t seem to be adding as high of a margin to the prime rate. For the last 4 weeks, mortgage rates have continuously been adjusting downward. That may change soon.
The Federal Reserve has signaled that the hike in the prime rate may be slowing. Today, the Labor Department released the consumer price index (CPI) for November, which showed inflation at 7.1%. This is decrease in rising prices from the 7.7% reading for October and 9.1% in June. The FED has been waiting to review those numbers prior to their planned increase on Wednesday. However, their target inflation number is 2%.
It is important that both the housing and automotive markets get relief from rising interest rates and the FED knows this. Offsetting inflation requires a careful balance that will prevent a recession too. There are many buyers waiting on the sidelines to see where interest rates will settle. Since the FED has a target rate between 3.75 and 4%, we might expect mortgage rates to settle between where they are currently and 7%.
The advantages of buying now may give borrowers a chance to lock in a lower rate. Additionally, because of less competition in the housing market, they may be able to get a lower purchase price. Soon, a day will come when the pent-up demand races back into the housing market. We might expect home prices to stabilize or even climb higher.
All markets are driven by how supply meets demand.
The core portion, which excludes energy and food should be around 6.1%, a small drop from the 6.3% figure of the prior month.
It is a very strange time in the economy where good news is actually bad news. The positive jobs report and other growth factors have driven inflation higher. However, for the 3rd consecutive month, we should have a drop in the inflation rate.
The stock market appears to be betting that the days of the 75 basis point FED hikes are behind us. Most believe that the next hike will only be 50 points.
The 7% rate for inflation is still relatively high, so we shouldn’t expect the FED to stop raising rates anytime soon. Inflation has been described as too much money available for too few products. This leads to a rise in prices. We’ve seen this in every market from houses, used cars to what we buy in grocery stores.
By eliminating easy access to money, the FED is hoping that less demand brings prices back down to affordability. However, what is happening today in the housing market is very different from 2008. Instead of an enormous influx of inventory eroding home values, inventory returned to normal levels and home prices are relatively stable.
For buyers, the current market presents an opportunity to borrow at rates lower than what may be available in 2023. For sellers, home prices are still close to where they were at the beginning of the year. The opportunity to get a better purchase price is still on the table.
No matter what happens with economic conditions, those who see an opportunity often succeed.