Just a short few months ago, the housing market was in overdrive with soaring home prices, historically low interest rates, and very high demand. But that’s changing now, some experts say the real estate market may be headed toward a “housing recession.” But others just aren’t sure and remain baffled despite the evidence of rising mortgage rates and faltering homes. So let’s see if we can make some sense of all this. Let’s take a look at what the experts are saying we can expect in the Aurora real estate market this winter.
Rising Interest Rates
In the Aurora real estate market and elsewhere interest rates are going up. And that will make buying a home much more expensive.
“Since December,” the experts say, “mortgage rates have nearly doubled – rising to around 6 percent, the highest they’ve been since 2008 – in response to moves by the Federal Reserve to control inflation. In January, a buyer would have paid around $2,100 a month in principal and interest for a $500,000 home loan. Today, that same loan would cost about $2,900 a month.”
The upshot is that “[m]any buyers simply cannot absorb that kind of increase, particularly when it’s combined with current home prices, which rose more than 20 percent from May 2021 to May 2022.” Although rising rates are making home buying less affordable, experts don’t see rates going as high as the elevated levels in the 70s and 80s.
The experts’ verdict? “When inflation peaks, mortgage rates will have peaked, and that’s really the key ingredient.”
Falling Prices and Decreasing Demand
Along with rising mortgage interest rates, there is evidence of falling home prices. Although prices are not dipping dramatically, this can still have a marked effect on the real estate market.
Here’s how the experts see it unfolding this winter . . .
“Prices are unlikely to take a nosedive, but cracks are showing. In the four-week period ending June 26, the median asking price for newly listed homes was down 1.5 percent from its all-time high this spring, and, on average, 6.5 percent of listings dropped their prices each week . . . Demand is down, too. . . . [F]ewer people were searching Google for homes and asking to tour properties. Mortgage applications were down 24 percent, and pending sales fell 13 percent from the same time a year earlier, the largest drop since May 2020.”
Experts believe the “long-term outlook is still quite strong.” But in the short term, owing to all the volatility the economy is experiencing, home prices are expected to continue to fall over this winter. In any case, though, “the days of double-digit percentage price increases are likely over.”
To find out exactly what home prices are doing in the Aurora real estate market, you can contact a Aurora agent. Just call (303) 810-1202 to discover more.
Homeowners in a Comfortable Spot
Now what the real estate market this winter means for homeowners who may want to sell is that they are in a pretty comfortable spot right now.
“Prices are still rising in nearly all markets across the country . . . and inventory is improving slightly, but not greatly so . . . Homeowners are in a very comfortable position financially, in terms of their housing wealth . . . [H]omeowners are absolutely not in a recession.”
Buyers May See a Better Market
This real estate market will also present a better market for buyers, who will encounter “a more balanced market.”
“For buyers, the slowdown in demand is generally good news.” According to industry experts, “[b]uyers should expect a little better price negotiation possibility . . . Last year, they were at the mercy of whatever sellers were asking . . . and there were multiple offers. Buyers may not face that now.”
Of course, a lot of it depends on specific local market conditions, but, generally, buyers are likely to encounter “more normal buying experiences. In some places, the slowdown means less competition and more likelihood that sellers will accept offers that come with contingencies,” which hasn’t been the case for a while.
Sellers Will Need to Be More Realistic
This will need to be more realistic in this winter’s real estate market, likely having to lower their expectations from what the market allowed a few months ago.
Here’s what the experts say about this: “Sellers need to be realistic about the changing market . . . They cannot expect to simply list their home at a high price and easily find a buyer. Too many buyers chasing after too few properties – those days are over.” But the fact remains that homes are still selling fairly quickly.
What to Do About the Aurora Real Estate Market This Winter
So what does all this mass of information mean for you as a home seller or buyer? Basically, it means that the services for a good Aurora agent are more critical than ever. The market is going through some rapid changes, and you’ll need an experienced professional to successfully navigate all that’s going on. So if you plan to buy or sell in the Aurora area real estate market, be sure to contact us at (303) 810-1202.