House for sale depicting home sales cooling

Here's a piece of good news: if you are still reeling from the scorching market and subsequent bidding wars of the last couple of years and you came out of it without a new house, now is probably your moment.

The housing market in the entire country is slowing down, and it has started to affect Southeast Michigan.

As a seller, it may be somewhat of a surprise - and an unwelcome surprise at that - to find that your starter home won't garner three deals on the same day it goes on the market.

However, don't get too discouraged! There is overall good news in this for everyone.

For one thing, most experts say it's not a temporary downturn but part of a more significant slowdown. So, as you are seeing home prices inch downward now, you can probably expect to see them continue to inch down toward next spring.

A market slowdown is highly preferable for buyers and sellers than a housing bubble leading to a recession.

The Trend in Southeast Michigan

The number of homes sold in this area was down 5.7% in September, according to data collected by RealComp, which is based out of Farmington Hills. New home sales were down as well in September, which follows the trend for existing homes.

Part of the reason for the slowdown is that interest rates have begun to go up. While you may have gotten an interest rate below 4% a year ago, the rates hit an average of 4.9% for a 30-year mortgage this fall with every indication that they may continue to go up.

Experts are predicting that rates may be as high as 5.55% by this time next year. These kinds of rates may seem high to you but bear in mind that in the early 2000's, the rates were closer to 7 or 8 percent.

How a Cooldown Affects Buyers and Sellers

Sellers

As you may have reason to expect, market conditions are slowly returning to more normal conditions for sellers. Houses will typically sit on the market for slightly longer than they would have before the hot market began.

Gone are the days of multiple bidding wars and cash offers on the same house, and prices will not continue to rise. If you were planning to sell your house for an above-asking price on the same day you list it, you might need to adjust your expectations.

This market change doesn't mean you won't sell your home! Rising borrowing costs coupled with rising material costs mean that inventory is still low. Also, many buyers who were discouraged by the too-hot market of the last several years may be shopping again.

Buyers

First-time buyers are, unfortunately, still going to be in a tight position. Although the mortgage interest rates aren't nearly as high as they have been in the past, it is discouraging to see how much they've climbed.

Additionally, inventory may still be tighter than in years past as rising costs and lowering sales keep new homes from being built. The primary advantage you have on your side now is time, and lower asking prices.

In the last two years, it may have been all but impossible for the average first-time buyer to snag a single-family home. Now, you have the luxury of shopping around without the fear of losing your chance.

It's a good bet that now you can make a realistic offer on a house and get it accepted. The sooner you decide to enter the market, the lower interest rate you will be able to secure, as rates will continue to rise through next year.

Takeaway

Because the rest of the economy is strong and incomes are still rising, experts don't predict that this housing cool-down is predictive of a recession.

Although the market is definitely cooling, and will probably continue to cool down throughout this fall and into next year, it will create opportunities for some without jeopardizing sellers' chances.

If you are ready to buy or sell, please give us a call. We would be happy to help!

248-348-7200