Real Estate Marketing & Beyond
Rising mortgage rates have begun to cool the western Massachusetts housing market, as buyers become more cautious about taking on larger monthly payments. The average interest rate on a 30-year fixed-rate mortgage has climbed above 7%, the highest level since 2007. This has made it more expensive for buyers to finance a home and has led to a decline in sales activity.
According to a report by the Warren Group, single-family home sales in western Massachusetts fell by 11% in June compared to the same month last year. The median sale price also declined, by 2.3% to $565,000. Springfield-based real estate agents agree, with one expert interviewed by Western Mass News stating that with mortgage rates going up, buyers are having a more difficult time affording homes. As a result, the housing market is starting to cool in western Massachusetts.
The market, though, is still healthy, experts insist, even as the number of bidding wars declines and buyers are showing signs that they need to be more realistic about their expectations. It’s still a seller’s market, as people are still buying homes, but sale prices are lower as the rising mortgage rates continue to have a cooling effect on the local market. This trend is expected to continue over the coming months as well.
Mortgage rates above 7 percent are a major influencer on the housing market in both western Massachusetts and beyond. Additional details include how the inventory of homes for sale has increased slightly, as some sellers have decided to wait until mortgage rates come down before listing their homes. Likewise, the average time it takes for a home to sell has increased, as buyers are taking more time to make a decision because of the increased financial burden of such high mortgage rates.
Prices have also begun to come down, with the number of homes that sell for above asking price has decreased as buyers are becoming more price-sensitive. And, perhaps most telling, the average monthly mortgage payment has increased by about $200, as a result of the higher interest rates. Overall, rising mortgage rates are having a moderating effect on the western Massachusetts housing market.
The Massachusetts housing market is likely to be a bellwether for many of the other real estate markets across the country. We’re likely to see the impact of 7 percent mortgage rates (with the possibility of rates climbing even higher) to impact housing markets throughout the US, which will slowly but surely chip away at sales activity. Buyers will be much more reticent to commit to such a massive financial decision when their mortgages are going to cost so much more than they would normally. Sellers, meanwhile, will face the decision to either reduce their asking price because fewer buyers will be able to afford larger mortgages or postpone putting their property up for sale until conditions improve.
It’s not an ideal situation to be sure, but it’s also not the end of the world. The real estate markets in the US have been riding high for a very long time, and it’s only natural that there would be a correction or two in our future as such high performance is simply unsustainable forever. However, how far the correction will dip, and what the timing will look like, are anyone’s guess at the moment. The best advice is to be sure to monitor the situation closely to remain on top of which direction the market will break going forward!
