RE/MAX Douglass Real Estate agents are beginning to prep for new home listings. The market is cyclical by nature, with spring seeing sellers begin to appear and buying peaking in the summer once kids are done with school. That didn’t happen last year as the emergence of COVID-19 threw a wrench into the mix. Inventory was down, but sales didn’t falter due to people fleeing unrest from larger cities. The new supply and demand dynamic led to prices skyrocketing.
In recent months, historically low interest rates have begun to reverse. The St. Louis Federal Reserve shows a gain of a half percent since December. That doesn’t sound like a lot, but a rise in rates means buyers who finance lose purchasing power. More of their available monthly payment goes to interest rather than principal. There are ways to measure this sensitivity and it is more acute at lower levels than higher, meaning small rate changes have a big impact.
Agents Gretchen Janssen and Karen Lahti say many are coming in with cash offers, and homes are off the market in two days, on average. That compares to several weeks in a more normal environment. Cash buyers are not restricted to paying a reasonable market value, like those using a mortgage are. It is further fuel for what Janssen calls “elevated prices.”
Lahti says she thinks the tide will turn this spring.
A hot market makes it harder for first-time buyers to compete, but not impossible say Lahti and Janssen. If you are looking to purchase, do as much prep work as possible before looking, including pre-qualifying for help from a local bank or credit union.