American homeowners continue to see the value of their homes rise as buyers remain poised for the beginning of interest rate reductions by the Federal Reserve.
Anticipated falls in mortgage costs have yet to materialize as the Fed remains concerned about the risk of inflation due to the nation's strong economic performance and buoyant employment growth.
America's real estate market is currently dominated by three related factors that hold back normal levels of home sales. These are:
- High mortgage rates.
- Low levels of for-sale inventory.
- Record-high prices.
Each of these factors will continue to influence the market until the Federal Reserve begins to reduce the cash rate from 5.25% to 5.5%, pushing retail mortgage rates to 7%-plus.
The good news is that our inflation rate was 3.3% in May – agonisingly close to the Fed's goal of a 2%-3% range. Hopefully, the long-awaited cuts in mortgage costs are around the corner.
The latest figures from the National Association of Realtors (NAR) indicate buyers are waiting for the market to turn.
NAR reports sales volumes fell 2.8% year over year to an annualized rate of 4.11 million in May. That's a dip of 0.7% compared with April's number.
The median home value rose to $419,300, a 5.8% annual gain and the 11th successive monthly increase.
While values edge higher, more homes are coming onto the market. NAR said 1.28 million homes were for sale in May, 6.7% higher than in April.
Waiting for mortgage costs to fall may not be the best strategy for upgraders and buyers.
While NAR predicts the increasing inventory will “tame” prices, more buyers will enter the market and push prices higher once the Fed starts cutting rates.
In my experience as an agent, I've found that trying to time the market is a risky strategy because momentum can swing faster than owners can react.
However, if you're waiting for the right moment to make your move, I'd recommend the following:
- Prepare your home – repair any faults, and set it up for a five-star presentation.
- Organize your finances – knowing your budget is critical.
- Select your agent – and I'd be happy to help you.
- Keep researching the market – pay close attention to price trends where you live and where you wish to buy.
