Will 5% be the New 3%?

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@johncnataleOnly time will tell if we even get back down to that 5% rate. If the recent fall is any indication, it’s possible we will be in the 5% range come the spring market. Here’s where things get really tricky. Inventory is right near record lows. Interest rates at 5% will seem like a bargain compared to the 7.5% they were in November. If that perfect storm hits together: Spring 2023 market, interest rates at 5%, and little to no inventory, you’re going to see a very similar environment as early 2022 when home prices skyrocketed. It may not be as severe because rates will fundamentally be higher, however it will all be about perception. In our market here at the Jersey Shore, the truth is the inventory is right near its low. The absorption rate, the amount of time it would take for all inventory to be sold if no new listings hit the market, is hovering around 1.5-2 months of inventory, all time lows. A balanced market is 4-6 months of inventory. There’s so many factors that could change all of this though. Lower rates around 5% will most likely increase inventory since current homeowners will be motivated to use their equity and step up or downsize with rates close enough to their current 3% rate. It’ll be interesting to see if 5% becomes the new 3%, which drove everyone crazy in 2020, 2021 and early 2022. If you need to stay up to date with what’s happening in the real estate industry, especially here at the Jersey Shore, don’t hesitate to contact a Realtor at Natale today.♬ original sound – John C. Natale Jr.

Only time will tell if we even get back down to that 5% rate. If the recent fall is any indication, it’s possible we will be in the 5% range come the spring market. Here’s where things get really tricky. Inventory is right near record lows. Interest rates at 5% will seem like a bargain compared to the 7.5% they were in November. If that perfect storm hits together: Spring 2023 market, interest rates at 5%, and little to no inventory, you’re going to see a very similar environment as early 2022 when home prices skyrocketed. It may not be as severe because rates will fundamentally be higher, however, it will all be about perception. In our market here at the Jersey Shore, the truth is the inventory is right near its low. The absorption rate, the amount of time it would take for all inventory to be sold if no new listings hit the market, is hovering around 1.5-2 months of inventory, all-time lows. A balanced market is 4-6 months of inventory. There are so many factors that could change all of this though. Lower rates of around 5% will most likely increase inventory since current homeowners will be motivated to use their equity and step up or downsize with rates close enough to their current 3% rate. It’ll be interesting to see if 5% becomes the new 3%, which drove everyone crazy in 2020, 2021, and early 2022. 

If you need to stay up to date with what’s happening in the real estate industry, especially here at the Jersey Shore, don’t hesitate to contact a Realtor at Natale today.