Good Monday Morning!

The rise in mortgage interest rates gets all of the attention for slowing our current local Real Estate market. The truth is that there is another culprit out there that is having an even larger effect on our housing market. This culprit is the long term low inventory of homes for sale. Our local inventory continues to bounce between 1 month and 1.7 months of active inventory. This is the number of months that it would take to exhaust our inventory if no new homes hit the market. A healthy market maintains around 6 months of inventory. Our largest problem right now is not a lack of ready and willing home buyers, but a lack of homes for the ready and willing buyers to purchase. The root cause of this problem is the fact that most homeowners are sitting on mortgages that range from 2.25% to 3.5% and don't want to give up on those rates and jump into a current housing market where interest rates are double or more. If mortgage interest rates tick up even further it could lead to an even lower inventory of homes for buyers needing housing. The following is a recent article from "Realtor.com" that talks about this situation.

Homes listed for sale remained on the market for 18 days on average, unchanged from the previous month. Last June, homes were only on the market for 14 days.

Sales of existing homes across the country were mixed—the Northeast saw home sales climb in June by 2%, but the rest of the country saw flat or even drops in the number of homes being sold.

All-cash buyers made up 26% of sales. The share of individual investors or second-home buyers was 18%. About 27% of homes were sold to first-time home buyers.

Big picture: The housing market has recovered, but with inventory at record lows, the big question is whether it is sustainable.

Home sellers continued to hold out on selling their homes amid mortgage rates that hovered near 7%.

Builders were responding to the lack of inventory by ramping up home-building, but new housing units may not be enough to address the shortage of homes for sale.

Home prices were also at near-record highs, as the NAR noted, which coupled with high rates, makes homeownership unaffordable for many Americans.

What the realtors said: “It is a tough market to be a buyer in the current environment,” Lawrence Yun, chief economist at the National Association of Realtors, said.

Yun added that there were “simply not enough homes for sale,” and that even if inventory doubles, the market could “easily absorb” it.

Buyers are still contending with multiple offers, Yun said, and one-third of homes are getting sold above their list price.

What are they saying? “Existing home sales fell more than expected and are likely to remain subdued until mortgage rates ease or inventories improve,” Erik Johnson, senior economist at BMO Capital Markets, wrote in a note.

“Perhaps stabilizing prices will be enough to convince more owners to put their homes on the market, but it’s likely that the fate of both existing home inventories and mortgage rates will remain linked for the foreseeable future,” he added.

Have An Awesome Week!

Stay Healthy! Stay Safe! Remain Positive! Trust in God!

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