This month, Berkshire real estate professionals have been discussing home inventory, buyer demand and how an environment with rapidly changing mortgage interest rates may impact sales in the months ahead. At the close of the third quarter, the historically high pace of real estate sales in Berkshire County in 2021 was not sustainable; there had been a 5 per cent drop in the dollar volume transacted so far this year and a decrease of 10% percent in the number of residential homes sold. Despite this downward sales momentum, the median sale price of homes rose 6 percent, to $325,000 countywide. It is important to note that in 2019, in January through September sales amounted to $295 million dollars, compared to $456 million dollars this year to date. The 2020-2021 market expansion was significant.
When looking at the market activity in mid-October of this year, some properties listed for sale are still generating multiple offers, while others we see reporting significant price reductions in the first few weeks of listing. Sellers are faced with a shifting market and cautious buyers. In this rapidly changing market, it’s important for sellers to work with local Realtors who have minute-by-minute access to market data along with unparalleled knowledge of actual Berkshire market conditions to reach their real estate goals.
As the overall US economy struggles, mortgage rates fluctuated greatly in the third quarter of 2022 to try to correct inflationary issues. As Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors said, “Three factors mainly affect mortgage rates in today’s market: expectations on inflation, economic growth and the Fed’s next rate hike. Inflation and higher interest rates typically move up yields as investors demand a higher return.”
The average 30-year fixed rate was as low as 4.99 percent in Aug. yet was 6.7 percent at the end of September, according to Freddie Mac. Mortgage rates rose above 7% percent in October. Freddie Mac and the Mortgage Bankers Association predict the average 30-year fixed interest rate will settle at 5.4 percent and 5.5 percent for the fourth quarter, yet the National Association of Realtors forecast 6 percent by the end of 2022.
For buying power, when borrowing $300,000 at a 7 percent interest rate, a buyer’s monthly payments would be almost $2,000. At the beginning of 2022, when interest rates were around 3.5 percent, monthly payments on a $300,000 mortgage would have been just under $1,350. The same loan now costs roughly $650 more per month.
While the rising mortgage interest rates are pushing down demand as the Fed had hoped, many buyers see this shift as an opportunity to enter the housing market with a bit of leverage. Contract negotiations resume in a more balanced market and appraisers and home inspectors are carefully analyzing the home’s long-term stability and value.
Despite demand slowing, there’s still a shortage of available homes that makes some properties popular and competitive for interested buyers. In September, there were 614 homes on the market for sale in Berkshire County, compared to 1,759 ten years ago, a 35 percent decrease. Since 2013, the inventory of homes for sale has continued to fall. The many factors contributing to a decline in inventory include low building rates in our area, a larger population of citizens desiring homeownership, a shortage of optimal living options for active elderly, and the appeal of investment as a sound strategy for long term wealth.
All real estate professionals are urging buyers in the market to maintain updated preapproval letters from their lender to make sure their price range remains accurate with the latest rates. Real estate professionals are also directing their lower income buyers to investigate new programs launched by Freddie Mac, Mass Housing and in collaboration with local lenders and agencies. Next week, stay tuned for the in-depth cumulative Quarterly Market Watch report with town details and highlights on other property types.