Mortgage rates plummeted to record lows during the pandemic, driving up demand and pushing up listing prices. The frenzy has come to an end, giving buyers negotiating power for the first time in several years. But it’s not all good news. Here’s a look at what’s happening in the housing market right now and what rising interest rates mean for home buyers going into 2023.
Mortgage Rates are Above 7%
In October 2022, mortgage rates for a 30-year fixed-rate home loan surpassed 7% for the first time in over 20 years. This makes borrowing money more expensive, affecting how much house you can afford. For instance, a $250,000 mortgage with a 3.5% interest rate, like we saw in January 2022, has a monthly payment of about $1,100. Raise the interest rate to 7%, and that same $250,000 mortgage comes to $1,660 per month.
Home Sales are Falling Fast, but Prices Remain High
Rising mortgage rates are pricing out buyers, leading to less competition and listings sitting on the market longer. Declining home sales have led sellers to discount their prices for the first time since before the pandemic began. The bidding wars may be over, but median sales prices remain high because of how much they skyrocketed in 2020 and 2021.
New Home Construction has Slowed Down
Builders are worried about the drop in demand as mortgage rates climb, so the start of new construction projects has declined steadily since the summer. The decrease is more drastic than any other seen since 2011 (except for February to April 2020, when the pandemic first hit the United States).
New Listings Have Dropped
New home listings in Columbus, OH, rose every month for the first six months of 2022. Then, July saw a nearly 20% drop compared to June. New listings for October 2022 were also 15% lower than October 2021. Data indicates that potential sellers are staying put as home price growth slows down. People also have less reason to move thanks to the strong labor market and record equity in their homes.
Rent Continues to Climb
Although the pace of growth has started leveling out, rent prices in Columbus jumped from $1,200 in January 2021 to $1,570 in October 2022. And as more prospective buyers are priced out of the housing market by high mortgage rates, the rental market is expected to maintain a high demand.
While this sounds like a lot of doom and gloom, it’s important to remember that things will rebalance soon to get us back to a normal market. In the meantime, turn to Vutech | Ruff, Corcoran Global Living, for help simplifying the home-buying process. Our award-winning agents have years of combined experience providing outstanding real estate services throughout the Greater Columbus area. Let us help you buy a home so you can cross the threshold to your new life as quickly as possible! To speak with a knowledgeable Ohio real estate agent, please call us at 614-897-0618 or contact us online.