The Fed raised interest rates another 75 basis points (three quarters of a percentage point) last week on Wednesday, July 27 .
Ironically, however, mortgage rates have now fallen to 5.27 percent this week, down from the average of 5.76 percent they were just a couple of weeks ago, according to latest reports by Bankrate.
According to M&D Real Estate’s Founder and Managing Director Danny Perez, we are in the thick of the pause in transactions right now. And it will only get thicker after the recent interest rate hike before things hopefully start to balance out in the next 30 to 90 days.
What does that mean? The pause is what occurs when buyers start pulling out while they wait on something to change. This something will have to be sellers coming down on prices.
In a recent statement by the chief economist at the Mortgage Bankers Association to Bankrate, he theorized that, “mortgage rates may have already peaked and could stay between 5 percent and 5.5 percent through the remainder of 2022.” Comparatively, in June 2021, interest rates were around 3.2 percent.
While home prices have continued to rise in the North Texas area – higher than anywhere else in the country, multiple offer situations have cooled down significantly in many situations.
“Seller expectations are going to have to come down to meet the buyer where they are at,” said Danny Perez. “Otherwise, we stay stuck in the pause where sellers are listing more and more, as we can see from the sharp increase in listings in June 2022, but buyers are pulling out feeling the weight of rising interest rates coupled with huge price appreciation to too great an extent.”
This is also demonstrated by closing sales being down an average of 8 percent across North Texas.
It is always hard to predict what the market will do. But typically in a situation such as this, we will see buyer activity pick up once sellers start pricing in the range of single digit price appreciation year over year, instead of the 30 percent price appreciation we are still seeing some homes listed at right now.
Before this will happen, sellers are going to have to have to see their property sit on the market before offering price reductions in order to sell.