By Mike Bodeen · 29 October 2018
Balance is good, especially in local real estate markets. Sure, if you’re a homeowner, you’d like to see the scales tilt towards a seller’s market, which we’ve been experiencing for several years now. And if you’re a buyer you want to see the market tip in your favor. Well buyer’s, the scale “might” be tipping back your way – but at a cost!
Higher prices and higher mortgage interest rates may be contributing to a recent market malaise. Sales are slowing and inventory is growing, albeit weakly.
The local barometer that the Bodeen Team watches most closely is the Cromford Market Index (CMI), which you may have noticed always at the top of the Snapshot. We believe the CMI I the best indicator of balance or lack thereof in the market between a buyer’s or a seller’s market.
On the other hand, recent history shows us that it’s normal for the CMI to drop at this time of year. In fact 42 weeks into 2018, the CMI has been highest in the past 5 years. The acid test will commence with the new year, which traditionally ends our holiday doldrums.
Keep in mind that a balanced local real estate market is a score of “100.” We are currently scaled at 144.6. Still a seller’s market overall, but trending toward buyers.
“Jim, if rates ever get below 13% again, we’ll be rich!”
So what’s a buyer to do? Well buyer, your situation remains the proverbial “caught between a rock and a hard place.” Rents keep rising. Prices are still rising. Mortgage rates, as of this printing, continue to rise, but remain historically low – way low! To an older dude like me who experienced 18% mortgage rates (see chart) back in 1980, 4.85% is a bargain! I recall well saying to my Truckee, California colleague Jim Orebaugh, “Jim, if rates ever get below 13% again, we’ll be rich!”
One professional’s advice: Keep (or start) looking at homes. If you see one you like, make an offer on it. You may pay a little higher for a mortgage than a year ago, but you’ll be on the “other side” of home ownership enjoying a stable monthly payment, continued appreciation (probably), but most of all, a place you can call home! Then, if or when rates drop, refinance to a lower rate. If rates keep going up, you’re protected (assuming you get a fixed mortgage rate).
Market data referenced in this article comes from The Cromford Report.