The answer to that question depends significantly on mortgage rates and your perspective on the history of interest rates. Almost everyone will agree that inflation has become a big problem recently, and the counterbalance to rising prices is higher interest rates. Think of a seesaw; high prices on one side and interest rates on the other. As interest rates rise, they push demand down as fewer buyers can purchase homes, cars, etc. Conversely, lower interest rates push down borrowing costs and increase purchasing.
Mortgage Rates Still Historically Low
During COVID, interest rates plummeted because the government tried to prevent a recession. In 2021 the average 30-year fixed-rate mortgage was 2.96%. Today the average 30-year fixed-rate mortgage is 5.48%, an increase of 85%. Today’s rates were an absolute bargain compared to 1981, when interest rates peaked at 16.63%.
Advantage is Starting to Shift Toward Buyers
The real estate market is going through an adjustment period, and there is a shrinking pool of buyers simply because they cannot afford the purchase price and higher interest rates. Sellers will receive fewer offers as the buyer pool shrinks, and sellers will be motivated to adjust their asking price and terms because of higher interest rates. The inventory of available homes for sale will also increase. We have a long way to reach a balanced market between buyers and sellers, but the pendulum has begun to swing toward the buyer side.
Closed Sales, and Median Price
The sales data in Sarasota and Manatee Counties bear this out in the latest available April 2022 statistics. Closed sales are down 18.3% and 25.3% in Manatee and Sarasota Counties for single-family homes compared to last year. The inventory of available homes for sale increased by 33% and 42.98% for Manatee and Sarasota Counties, respectively, from April 2021. The bright spot for sellers is that the median sale price increased by over 27% in both counties from April 2021.
The median sale price increases from 2021 are not sustainable in 2022, given the future interest rate hikes forecast for this year. Now is an opportunity to sell before higher interest rates, and fewer buyers drive down your sale price if you are a seller. Buyers who can afford to purchase now should close now and avoid even higher interest rates in the future. Please contact me if you are thinking of buying or selling a home in Sarasota or Manatee County, please call or text me today at 941-799-9440.