What a Roller Coaster!
For the fifth straight month in a row we see an increase in our median sales price! We ended the month of January at $510,000 and we are now at $575,000. That’s almost a 13% increase in 5 months.
I don’t think anyone called this rapid increase in value over the last 6 months, but I guess it makes sense… even with the relatively high interest rates we are seeing. Be advised though, just because it makes sense, does not mean this is sustainable. Let me explain.
We still have less than 2 months supply of inventory. A “balanced” market (which we haven’t seen in YEARS) is closer to 4 or 5 months supply of inventory.
What does this mean? Looking at straight supply and demand economics, prices will rise. When a commodity is rare, the price goes up, right?
On the same note, let’s take a look at current demand. Are buyers active? Sellers are still getting over 99% of their asking price and it’s only taking 16 days to get their home in contract. This tells us that buyers are, in fact, very active.
Now, WHY is supply so low? A massive percentage of homeowners are locked into an interest rate that is below 4 and 5%. Unless something substantial happens in their life, these folks are sitting pretty. Very pretty. If they were to sell and try to buy something else, they would essentially be trading their 3.5% mortgage for one that’s almost double that. Even with the equity they may have, it is tough to pencil out.
With a majority of experts saying the Fed will raise rates again at least once in the next couple meetings, we are probably not going to see lower interest rates for a while. It’s going to be interesting to see what affect that has on buyer’s activity and prices over the remainder of the year. Pulling out of summer and into the fall will be very interesting for the real estate market.