Mortgage interest rates hit their highest point in 3 months but the impact on real estate activity is so far unremarkable.  Showings remain strong, contracts remain slightly elevated above the last two years and prices are beginning to slide, but only slightly.  

But with rates rising, inventory 50% higher than the last two years and buyers moving cautiously, the shift is on.  Expired and withdrawn listings are consistently elevated, days on market are creeping higher and it is taking over 30 showings before a home goes under contract.  

Sellers must be patient right now and remember that January is only 60 days away.  Increased market activity is likely only 75 days away.  And a strong spring real estate market begins in just 90 days.  

But the holidays are approaching and through the year-end, prices will slide, days on market will get longer, more homes will be pulled off the market and price reductions will increase.  But patient sellers who are diligent with their pricing can still capitalize on active buyers.  

Price

As anticipated, the average and median sold price remains elevated but is adjusting downward. This is the byproduct of interest rates beginning to rise 45 days ago. 

What’s interesting is looking at the last 8 weeks of average sold price for properties with a square footage below 2,500.  When interest rates drop, smaller homes sell more aggressively, exactly what we’ve seen since early September.  During this period, the average sold price increased from $506,000 to a high of $544,000.  

But the inverse is also true.  When rates rise, smaller homes sell less aggressively because those buyers are more payment sensitive.  Expect that the 8 week run of rising prices is over and the average sold price will slide for the remainder of the year.  

Days On Market

The average days on market will continue its climb through year end before a radical descent starting in January.  

As of last week, the average home was on the market for 46 days before going under contract.  Unless interest rates suddenly drop, anticipate DOM to rise to over 60 days by year end.  

Showings

While slowly declining as interest rates rise and the holidays approach, buyer activity remains strong at 22,040 showings last week, compared to just 13,148 a year ago. 

But this is once again offset by how patient and picky buyers are.  Last week, the average home required 30.03 showings before receiving an offer.  

And with inventory elevated, that means the average seller only experienced 2 showings last week.  While frustrating for sellers, that’s only because they have an expectation that it should be different. 

Weekly showings per listing is almost identical to the last two years.  Sellers would do well to remember that these are just the market conditions.  If they want to move their home before year end, they can either hope the right buyer comes along, improve the price or improve the property condition.   

Inventory

While expired and withdrawn properties remain elevated, strong new listings and modest contracts are keeping inventory relatively high at 10,662 properties available for sale. 

Based on historical patterns and rising interest rates, expect inventory to decline between now and year end by about 3,000 homes, ending with about 7,500 properties available for sale. 

Conclusion

More of the same.  Elevated rates cause buyers to be cautious, reversing a modest price increase as rates dropped.  Days on market will get longer through year end, more sellers will reduce price or take their home off the market and while interest rates are up, now is a great negotiating opportunity for buyers.  In the next 30 days we likely see seller concessions markedly higher and prices lower.