Every year, housing inventory gears down for real estate’s dormant period through the holiday season. After the new year begins, inventory then begins its slow hike towards peak in the spring and summer. It was approaching the time when inventory typically begins its final annual descent that rates hit 7% and demand vaporized.
With low inventory the belt keeping the emaciated real estate market’s pants up, I’m nervous about what could happen once more homes hit the market in Q1 and Q2 of 2023.
The inventory decline this year came in two distinct phases. Between January and July, mortgage interest rates rose from 3.11% to 5.81%: a 270 basis point increase representing a roughly 32% increase in one’s monthly mortgage payment.
Market behavior started shifting significantly once rates passed 5.5% in June. By July, inventory began its seasonal downturn…four months early. When rates finally reached and surpassed 7% in October (by which time monthly payments were up a nauseating 47%), inventory began to decline more steeply. Though steeper, inventory declined at more more moderate pace than it usually does at this time of year. This was an effect of reduced demand; despite fewer new listings being added to the market, the dearth of sales caused a relative buildup of older listings.- READ MORE