HomeServices of America has a message for its agents heading into the back half of the year: the buyers sitting on the sidelines waiting for mortgage rates to fall are talking themselves into a mistake.
The company released its mid-year housing outlook on Wednesday as a look at the year it said would provide stability to the housing market.
That outlook hasn’t changed, the company said on Wednesday, as it provided guidance to agents who are increasingly faced with objections related to high rates and buyer concerns that home prices are poised to crash. The brokerage’s answer to both is no, and consumers shouldn’t hold out for the market to fall out.
“While elevated mortgage rates continue to suppress transaction volume, we believe these are cyclical headwinds rather than structural weaknesses, positioning the industry for a healthy return to normalized sales activity as economic conditions improve,” said Chris Kelly, HomeServices of America CEO.
Chris Kelly
After mortgage rates dropped below 6 percent in late February — the lowest in over three years — the U.S. war in Iran jostled the market and sent rates soaring in the mid- to high-sixes.
The HomeServices report notes that mortgage rates are widely expected to remain at or around 6 percent through 2028. If $400,000 home prices appreciate at even a modest 1.7 percent in 12 months and rates fall to 6 percent, a buyer who waited for the lower rate would save about $3,000 on interest but pay about $10,000 more for the house and miss out on equity-building, the report notes.
Meanwhile, the report continues to encourage sellers to be realistic in their price expectations.
One in five homes for sale made a price reduction in May, the report said, citing ATTOM data and MLS records. The brokerage said the average price reduction from original price to final list price in February was 4 percent.
“This is a tale of misaligned expectations meeting a market that has more options, more time and more patience than it had two or three years ago,” the report says. “The market is not punishing sellers, but it is requiring them to be accurate.”
Home prices continue to reach new records on a monthly basis, though they’re rising at a slower pace than during the COVID-era housing market. Income growth is now outpacing home price appreciation.
National home prices are expected to appreciate 1.7 percent this year and climb steadily through the end of the decade, according to the report.
Still, there are key regional differences highlighted by the report, particularly when it comes to inventory and market balance.
The northeast is expected to continue to favor sellers, as inventory remains well below pre-pandemic levels.
The West Coast, meanwhile, is expected to be a balanced market, with tech hubs leading the strongest markets in the region.
Some markets in the Mountain West — led by Denver — are seeing inventory well above pre-pandemic levels, which is giving buyers an edge over sellers and keeping a cap on home price growth.
