After the high prices and bidding wars in 2020, 2021 and the beginning of 2022 in the real estate world, the end of last year we saw the brakes applied in a few different ways in the SE Wisconsin area,especially in the Kenosha and Racine County markets. Mortgage rates shot up, sales plummeted, inflation threatened to tank the economy, the supply of homes increased and house prices in many of the expensive markets decreased. All the Real Estate indicators pointed to trends that looked a lot like the housing market we had experienced before 2019. Not that there was anything wrong with the market in 2019, but hitting the brick wall in about July of 2022 came to a shock to many buyers and agents across the nation.
Nobody was predicting the rise in mortgage interest rates at the beginning of 2022. How could they? Experts started tracking mortgage interest rates 50 years ago. Last year, the percent increase from 3.2% to 7.0% was the most extreme in recorded history. Early market predictions said it was going to level off in the mid 5% range, but as you know, it didn’t. We were battling serious inflation for the first time in decades, and the tool for managing inflation has historically been shifting interest rates. The Feds started with a series of increases in the 10-Year Treasury Note, quarter after quarter. They were still at it at the end of the 2022.
When we look at current rates, the 10-Year Note is about 3.5% but the mortgage rates in recent months are close to 7%, so the spread is a lot more than you would expect it to be. In fact, instead of 1.7% spread, we are collectively looking at 2.9%. Why is the spread so wide? The experts say that market volatility is one reason. The bottom line is that mortgage interest spread has significant impact for potential 2023 buyers and what they will most likely have to pay in terms of interest rates, initially and over the life of their loan.
Alas the housing marketing trends for January and the foreseeable future, if the top dogs are referencing the right indicators, do not indicate a crash. First, look at delinquencies. They are currently at their lowest point since they began measuring them in 1979. Foreclosures are up a bit, but overall we are still near record lows. Notably we aren’t anywhere near the 2008-2009 Great Recession crash as far as foreclosures, and truthfully analysts don’t anticipate us to. Right now investors are truthfully looking for foreclosures to scoop up in this market, and aren’t finding them very easily.
So what does this mean for 2023 Trends? All predictions are saying there will be approximately 5.1 million homes sold in 2023. If you are a new buyer hitting the market, it’s probably a good time to shape your expectations for 2023. Three things to remember:
- We are still seeing buyer demand, but it’s not as high as it was.
- The inventory of homes is higher in some cases, but the number of new listings is not robust.
- Construction of new homes is slowing.
Don’t get discouraged home shopping in 2023. Rates were never as historically low as they had been in 2020-2022, and they probably may never dip that low again. Interest rates are leveling and now’s the perfect time to gauge what you can qualify for and we have a better chance of getting the best home for you without having to make a 20 minute rash decision and overbidding 30-100k just to buy a home, like buyers had been doing in the last few years. You may actually save money overall!
If you’re ready to jump into the market this year reach out to me. I’m happy to guide you through the process!
