By Cindy Royall Libonati
Who knew that a pandemic could lift the housing market and help the economy recover?
I hear people say that rates are so high. Compared to pandemic rates that fueled a market surge they are, but that was a superficial time and not a realistic comparison. Interest rates are rising now, but are in the range that has been considered “normal” over the many years since I began my real estate career in 1976.
I also hear people say that prices are so much higher than when these rates were popular. True, but so are salaries and incomes, so instead of low down payments, I have seen more 20%-50% down payments, unlike years ago.
It also seems that many incomes are not salaried, but are on independent careers with many working from home, another reason for the boom. Many buyers need more room or are moving out of their former work neighborhood since they can work remotely. Millennials are on the move!
What has thrown a curve into the market are higher interest rates and people struggling due to inflation – in all aspects, not just interest rates. The price of gasoline, groceries and about anything you can think of has gone up significantly. A box of avocados that a restaurant would buy went from $35 a box to $75 a box. Even the price of apple pies at Costco has gone up $3 per pie since last year. The cost of making those pies has risen.
As recently as November 11, 2022, Dr Lawrence Yun, chief economist for the National Association of Realtors, stated that US home prices won’t experience a major decline and could possibly rise slightly in 2023 if mortgage rates remain at 7%. He is basing this on the high demand that still exists on the “severely limited housing inventory” that we have, and he predicts this will prevent any large home price-drops next year.
Here in our local real estate market, my fellow Realtors and I are very busy. Buyers have been waiting out the price hikes and are finding values in the ones that are priced well. We are still seeing multiple offers in many of those.
I believe serious buyers are taking what financing they can get now (other than 30-year fixed mortgages) and are planning to refinance in the future when inflation gets under control and interest rates soften. We all believe this will happen. Some sellers are also able to either offer to buy down an interest rate or offer closing cost credits.
Real estate leads the economy and when our Realtors are busy, we have work for other sectors like contractors, painters, plumbers, and all the like. Real estate ownership is the basis for all wealth. I believe that with all of my heart and experience over the years.
If you are thinking of making a move whether as a buyer or a seller, please contact your trusted Realtor for advice on the best path for you. I encourage you not to wait!
Cindy Royall Libonati is with Sotheby’s International Realty – Calabasas Brokerage. (Realtor®#00582036). She is available for consultation. Call (818) 421-4468.