Housing market is 'stuck' — local brokerage execs weigh in

It's a tough time in the residential real estate market across the United States and locally, according to industry experts.

"Low inventory, high mortgage rates, and high prices have put the housing market into a state of unaffordability that's weighing on house hunters, current homeowners, and even real estate investors. The market is stuck," according to an article on www.businessinsider.com. "The Federal Reserve's aggressive interest rate hikes over the last 18 months have led to mortgage rates hovering around two-decade highs, but so far home prices haven't fallen as they usually do when rates climb."

Bill Cole

Bill Cole

Edge Realty's Bill Cole said Multiple Listing Service (MLS) data shows local year-to-date residential home sales through Aug. 29 are down nearly 21%.

"Housing inventory in Cape County is up slightly from August 2022 but it makes sense that inventory is low because people with mortgages in the 3% to 5% range don't want to sell if a new home comes with a 7.25% rate," Cole said.

The 30-year fixed-rate mortgage averaged 7.18% on Thursday, Aug. 31, a slight drop from the 7.23% seen a week earlier, according to information released by Freddie Mac, otherwise known as Federal Home Loan Mortgage Corp.

The latest rates are the highest for a long-term home loan in the U.S. since 2001.

Andrea Sheridan

Andrea Sheridan

Andrea Sheridan, president of Missouri REALTORS, told the Southeast Missourian some historical perspective is needed.

"Freddie Mac has kept tabs on mortgage rates since 1971 and the average rate from then through June 2023 was 7.74%. When we look at the long term, this 7.18% rate is not crazy high. What was crazy is when we had 2% and 3% rates. If we look at the history, we're actually pretty normal right now. If people are thinking we're going to get under 5%, I don't think we're ever going to get back to that level. Five percent was abnormal," Sheridan said.

Lori Fowler

Lori Fowler

"Sellers on the fence about making a home change are holding back because they really don't want to trade in their exceptional mortgage rate for something twice as high. They are in a 'wait and see' mode, hoping rates will trend back down," said Lori Fowler of Area Properties. "It doesn't help that consumers' budgets are being challenged by the rising cost of everyday items such as gas, food and other essentials."

Tim Meredith

Tim Meredith

Tim Merideth of Century 21 Premiere Realty and Ashland Realty said he is following closely what the Federal Reserve does with interest rates going forward.

"If we are close to seeing the last (Fed) increase, I think it will bode well (for real estate) in 2024. There is a pent-up demand that will impact the market for the foreseeable future," he said.

Liz Lockhart

Liz Lockhart

Liz Lockhart of Riverbend Realty concurs.

"We are currently building up a backlog of owners who want to sell and buyers who want to buy. A loosening of interest rates would open up the market. Not a flood of listings but certainly a better market for 2024," she said.

Sheridan points to what she terms "a three-headed beast" responsible for residential real estate being in its current state of downturn.

"First, we had the builder drought that occurred during the last recession when a lot of builders simply left the industry. We had probably hundreds of thousands of houses that weren't built in the U.S. thanks to that drought. Second, people are staying in their homes longer. The last report I saw surveying homebuyers and sellers suggested people would stay in their current homes for 15 years on average. First-time homebuyers, according to the survey, expected to remain in that initial house for 18 years. Those figures are drastically different than in the past, which was closer to 7-to-10 years. People are simply staying in their houses longer now. Add to the drought I mentioned, with not enough houses being 'born' in the first place and you have the makings of a noticeably slow period, Third, interest rates are higher than what people commonly think of as 'normal'. The weird merry-go-round that is residential real estate just isn't moving as fast as it used to," she said.

Cole has the last word on the housing outlook over the next few months.

"The near future in the market depends on inflation. The Fed's goal is 2%. In July, the rate went the wrong direction, from 3% to 3.2%, which would seem to indicate future Fed rate hikes are ahead. Getting inflation under 3% will have a huge impact psychologically," he said.

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