With the implosion of the housing bubble now eight years in the rear-view mirror, homebuyers remain a cautious lot, particularly those in the market for luxury real estate, which ended 2016 in neutral.
Oversupply and rising prices are contributing to the slide and experts are spit on whether conditions will improve this year.
“We have seen inventory come back at a steady pace, and buyer demand is strong enough that it will continue to keep the market moving as we go through the next 12 months,” David Charron told The Washington Post.
Beckie Strum at Mansion Global pointed out that over-development across the country and around the world has left the luxury housing market “soft.”
This is leaving a real competition for buyers in a flooded market. However, the U.S. dollar remains strong on the global market. As a result, foreign buyers looking to spend with American money will be able to get even more for their cash.
Some experts cite rising mortgage rates, which have been on the rise nationwide. In December, the Federal Reserve raised interest rates by 0.25 percent.
The increased mortgage rates could be good news for Realtors and agents in the short-term. Buyers who have been on the fence may decide to purchase a home purchase before mortgage rates get too high.
“We should expect the early part of 2017 to be filled with a brisk pace of not only homes going under contract more quickly, but also taking less time to reach a settlement date,” Charon noted.
However, as March kicked off mortgage rates fell, reflecting investors’ concerns about uncertainty in the economy despite dramatic gains in the stock market. Investors may be reacting to the inflation rate, which has risen to 2.5 percent in January from 1.4 percent a year before.
“The uncertainty in the economy is impacting all markets, not just the mortgage market,” Sean Becketti, Freddie Mac chief economist, said in a statement.
Becketti added that the recent relationship between long-term rates and 10-year yields “continues to surprise.”
According to data released March 2 by Freddie Mac, the 30-year fixed-rate average decreased to 4.10 percent with an average 0.5 point.
Meanwhile, mortgage applications increased, according to data from the Mortgage Bankers Association. How this will impact the luxury market remains to be seen.
According to Zillow, home sales will continue to drop on the coasts, while the markets that will see stronger sales will be further inland. This trend will feature some surprise locations, like Nashville, where the housing market is heating up because of lower rent prices.
