Augusta home prices continued their rapid climb with a nearly 6 percent jump in the past 3 months (March-May 2022) compared to the previous three month period/quarter (December 2021-February 2022). If prices were to continue rising at that rate for the upcoming year, that would equate to a nearly 24 percent year over year increase for 2022 compared to 2021. Until recently, that has been music to homesellers’ ears, but with rising interest rates, time may be running out for homeowners to maximize their gains due to the fact the interest rate paid on their next home could be much higher than the rate on their current mortgage.
Housing inventory/supply has been the major issue driving up home prices both locally and nationally, but housing inventory has increased slightly from under 1 month’s supply in the January 2022 to April 2022 quarter to about 1.22 months supply a month later. My personal experience is that this has led to a new listing getting 4 or 5 offers that might have gotten 8 or 10 offers a month or two ago. While this isn’t ideal, my clients that have been willing to go “all in” on their offers by bidding over list and waiving appraisal contingencies have consistently been able to secure a home; whereas, a month or two, their same offer may have been beaten out by a similar cash offer.
The second most significant factor that will eventually have a noticeable impact on the local and national market is rising interest rates. As of this post in early June 2022, interest rates have leveled out a bit in the past few weeks around 5 percent; however, as inflation continues and the Federal Reserve promising more rate hikes in 2022, interest rates will likely climb much higher in the coming months. This will make it harder for would be homebuyers to qualify, and those who do, will qualify for less, which will put pressure on prices, as the number of home buyers drops. The end result is more housing inventory, less demand, and leveling out, or even decreasing, home prices.
The flip side is that higher interest rates also make it less appealing for current homeowners to sell. While it is almost certainly true they will profit from the sell of their current home when looking only at the price, the profits quickly erode away if they trade in their 2.75 percent rate for a much higher rate. There are currently more homes on the market in the CSRA than there have been in a while, so we haven’t felt the effects of this in the Augusta market yet, but if rates increase to 7 or 8 percent where they were in 2006-2008, selling will no longer make sense for many from a financial viewpoint. This leads to lower inventory, more demand, and an upward pressure on prices.
The key to understanding whether homes prices will continue to rise at a break neck pace, level out, or decrease in the months ahead is knowing whether the effect of rising rates will result in higher inventory due to a smaller pool of homebuyers, or whether inventory will remain critically low due to reluctant home sellers keeping their homes off the market. For the sake of the overall economy, let’s hope the former is true, because when there is a shortage of buyers and a shortage of sellers, it usually means we are in a recession.
Please call me at 706-726-2981 or click the Contact Me button on this page if you have questions about whether now is the right time for you to buy or sell your home.