Here’s what I predict will happen to critical market factors in the future.
What’s going on with the real estate market? Today I’ll explore the prevailing interest rates, delve into the intricate factors affecting them, and examine what these numbers mean for the future of real estate.
Currently, interest rates are around 8% to 8.5%, which is higher than expected. Various factors impact these rates, such as your credit score, the financing source, down payment, and market conditions.
Moving forward, it’s important to consider the impact of inflation on interest rates. I anticipate that interest rates may rise one or two more times by the summer of 2024. When interest rates exceed 7.5%, it becomes a tipping point where affordability for buyers starts to decline. This could gradually put downward pressure on home values, although it won’t happen overnight.
It’s worth noting that the current housing market won’t necessarily crash or experience a significant correction. However, there is a correlation between interest rates and home values. If interest rates rise significantly, home values will likely decrease proportionally.
One reason we haven’t seen this trend yet is due to a historically low inventory of homes since 2008. Builders haven’t kept up with the population’s housing needs, and millennials entering the housing market have caused a shortage of available homes. This shortage has kept home values strong. However, as interest rates rise, it may become more challenging for buyers to afford homes at current prices.
I predict that homes may remain on the market longer, with fewer buyers who are more hesitant. Sellers will continue to list their properties, leading to increased inventory. In Fresno County, we currently have 2.2 months of inventory, which may grow to four to six months over the next six to nine months, providing more choices for buyers and increased competition for sellers. This could potentially lead to a slight decrease in home values.
If you’re considering selling or buying a home, it’s crucial to assess your unique situation and life plans. Predictions are not guarantees, and the real estate market can be influenced by various external factors, including government policies. Timing the market is challenging, so it’s best to make decisions based on your specific circumstances.
If you’re planning a move in the near future, feel free to call or email for a discussion tailored to your needs. I’m happy to answer any questions.
