Housing market in a unique position as prices increase alongside interest rates
The York County housing market is in an unusual place this winter.
Interest rates are slowly ticking up, something that would typically suppress housing prices. Yet sellers are seeking more money for their homes.
"Buyers have been willing to pay the amount that they've been paying because there aren't enough homes currently to purchase," said Elle Hale, president of the Realtors Association of York and Adams Counties.
In October, 517 homes were sold in York County, a 19% decrease from the same period last year. Meanwhile, the median sale price for houses in York increased by 8% from 2021, according to RAYAC data.
Hale said low inventory is still a challenge in what has been a hot market. That is forcing some sellers into the market, she said, as they recognize the opportunity to sell while home prices remain high.
Home buyers in the United States are seeing conditions at their worst since 1978 — a first for the younger generation of consumers, according to a report published by Bloomberg.
About four in five consumers are now describing home buying conditions as "bad," according to the University of Michigan’s consumer sentiment survey for November. The market conditions are a direct result of higher interest rates, a move by the Federal Reserve to combat inflation, Bloomberg reported.
Home sales in York County have only continued to decrease throughout the year. In the first 10 months of 2022, 5,576 homes sold — a 9% decrease from the same period last year, RAYAC reported.
"Interest rates could go back up a tiny bit; we just don't know," Hale said. "So, if you're comfortable purchasing now, purchase now."
According to the federal mortgage agency Freddie Mac, the national average for the interest rate on a 30-year fixed mortgage is currently 7.09%. That's up 2% from a year ago.
The Labor Department recently reported that consumer inflation reached 7.7% in October from a year earlier, the smallest year-over-year rise since January. Excluding volatile food and energy prices, “core” inflation rose 6.3% in the past 12 months. The numbers were all lower than economists had expected.
Nonetheless, some analysts are predicting that the housing bubble that emerged during the COVID-19 pandemic will burst. Although York County hasn't seen a significant drop in home prices, the rest of the nation has. The Case-Shiller National Home Index showed a 1.3% decrease between June and August, the most recent data available from the St. Louis Federal Reserve.
“Once you start the process of prices falling nationally, there is a self-fulfilling momentum to it because no one wants to catch a falling knife,” Diane Swonk, chief economist for financial firm KPMG, told Fortune. “We’re easily going to see large double-digit declines. I think 15% next year is very conservative. We’re already turning.”
Buying a home is different for everyone, and Hale said the best thing a person can do is evaluate their individual situation with a Realtor to determine what's best for them.
"Purchasing now is still relevant for some people because later on you can refinance if interest rates go down," she added. "Different lenders have different programs too."
What do higher interest rates mean for the average home buyer?
A home buyer taking on a $416,000 mortgage at the current 7.09% rate would pay about $2,800 each month. When the rate was 5% last year, that same mortgage would have had a monthly payment of about $2,260.
With the fall season in full swing and winter around the corner, Hale said she's hopeful that the market will pick back up.
The Associated Press contributed to this report.