The housing market is complex. Prices are driven by a wide variety of factors that are local, regional, national and global. While basic concepts like supply and demand come into play, other things like mortgage rates, inflation, and even economic conditions in other countries all influence the housing market.*
In an effort to rein in raging inflation, the Federal Reserve boosted interest rates in March 2022, and again early May. It raised them even more in June, by three-quarters of a percentage point — which was, at the time, the largest Fed rate hike since 1994. An additional three-quarter-point hike was announced in July. And now the Fed has raised rates again, announcing yet another three-quarter-point hike on September 21. **
So what does this mean for Baltimore’s real estate market? Back in the spring and early summer, listings were being sold in a matter of hours or days, buyers were caught up in bidding wars and sellers were signing contracts well over their asking price. Things have slowed down somewhat, and a normally busy Fall market is less so this year.
Rising mortgage rates have continued to slow housing market demand, resulting in slowing sales and slower home price appreciation.
When rates rise, it leads to an increase in the monthly payment for a loan of the same amount. For example, at a 4 percent interest rate, a $250,000 mortgage would cost $1,194 per month. At 6 percent interest, the same loan would cost $1,439. The effects are even greater for larger loans.**
This kind of math reduces the pool of buyers for any given listing. When rates are low, buyers can afford a pricier home, but considering the current higher interest rates they need to set their sights on lower-cost listings to stay within their budget. Often the first offer on a home is the best offer, and this is especially true in the current market. Sellers should remain open to negotiation on any offer, and a good agent like Whit Harvey can help you through the process.
Listings are remaining on the market for longer periods of time. Reasonable price adjustments can increase the pool of qualified buyers.
No matter what happens to the real estate market over the next months and years, if you’re thinking about buying or selling a home, it’s a good idea to work with a knowledgeable real estate agent like Whit. He can give you insight into the local market and determine a fair price for properties in your area.
Excerpted from Bankrate, Nerdwallet
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