Fall is here and we couldn’t be more excited for the changing colors and crisp, cool weather. It’s one of my and Chelsea’s favorite seasons and fits our personalities perfectly - plus we love all the activities! Recently we had a blast at the Great Vermont Corn Maze in Danville (definitely worth it if you’ve never done it) and last weekend we picked apples at Hackett’s in South Hero and enjoyed their delicious cider donuts!

Much like we’d seen in August, September continued to follow the same market trends, with home prices coming down a bit more. However, homes are still bringing in very healthy numbers due to our continued low (but slightly increasing) inventory - across the board new listings, pending contracts and closings were down and prices slipped another 1.9% from August. Over the past 4 months home prices have decreased by almost 3% in total, so we’re starting to see a more rapid drop as mortgage rates continue to jump up.

Inflation is Still a Pain!

Late last month, the Federal Reserve met again and announced a third consecutive hike of 75 basis points. Despite these supersized increases, inflation continues to be a challenge - in August the core personal consumption expenditures (core PCE), a measure of inflation that strips out volatile food and energy prices, rose by 0.6%, with the year over year climbing 4.9%. This is well above its benchmark target of 2% which means we’ve still got a ways to go. 

Mortgage rates are not directly tied to the federal funds rate, however they are tied to bonds which go down in price when the Fed Fund Rate goes up. In turn, when bond prices go down, we see mortgage rates go up. After the latest rate hike, we are currently sitting at around 7% for a 30-year fixed-rate loan. 

The Bottom Line: Mortgage rate forecasts for the remainder of the year are a mixed bag, with many suggesting that rates will increase a bit more and then start to level off. Note that if you’re a buyer putting their search on hold in hopes of waiting for lower rates, it's predicted that it could be late spring before we start to see any substantial change. Just know that while mortgage rates and housing affordability are of course always a factor, remember that you’re never married to your rate! You can get into a home at the current rate and then if the rate goes up you feel good that you're locked in lower, but if the rates drop, you refinance to the new lower rate - so either way you win!

The Impact of Rising Mortgage Rates on Buyers

Buyers have been paying top dollar for homes for the past couple of years without even thinking about it - it’s just what they had to do if they wanted to get a home. But with climbing mortgage rates their payments have rapidly been increasing and the cost of owning a home is more expensive and has become out of reach for some. As a result we’re seeing some buyers leave the market altogether - when they were previously approved for a certain budget and that budget has now drastically decreased due to the increased rates and their diminished buying power, they’re now not loving what their new budget affords them and are choosing to stay put. And buyers who are staying in the market are becoming much more aware of the condition of homes and raising their standards of what they find acceptable given the fact that sellers are still asking top dollar. 

The Bottom Line: The market is starting to and will continue to shift, and while Vermont is relatively insulated from some of the major fluctuations and changes that larger metropolitan areas typically see, there are and will continue to be opportunities for buyers that we haven’t seen in the past few years. Inventory is slowly starting to increase - we’re now sitting at just under 2 months of single-family and condo inventory across the state and as demand decreases and inventory continues to grow, we’ll see the shift from a seller's market to more of a neutral market with more homes to choose from, lengthening days on market and stabilizing prices. This will allow space for buyers to negotiate, add contingencies into their contracts and ask even for repairs! This will also create opportunities for sellers who also need to buy since you’re more likely to be able to negotiate a contingent sale into your contract. This is a contingency allowing you to get under contract on your new home and still have time to sell your current home before having to close on your new one - this previously would have been a big negative for your offer since sellers had so many clean and competitive offers to choose from. 

So Where Does That Leave Sellers?

With buyers no longer willing to pay top dollar for a home that doesn’t meet their standards, we’re seeing more properties coming back on the market after they’ve fallen out of contract, along with an increased number of homes sitting on the market for longer. We know that accumulating days on market likely means a price adjustment is needed and we saw quite a bit of these last month - 357 homes across the state saw a price drop with 75 of those homes located in Chittenden and Franklin Counties. As we’ve mentioned before, when these types of changes start to happen in the market, it can be hard for everyone to keep up, especially if the changes come on suddenly - many sellers haven’t wrapped their minds around the fact that we’re not in the market we were even 6 months ago, and they of course don’t want to accept the fact that they may not get as much money as they’d hoped for their home. This creates sort of an in-between period which is where we are currently, with a gap between the realities of buyers and the expectations of sellers.

The Bottom Line: As a seller making sure you’re ahead of the market is key and focusing on condition and price are the two factors you have the most control over. The homes that are priced correctly from the start, and are move-in ready, are the ones that continue to get multiple offers and sell for over the asking price. Listening and adapting to what the market tells you along the way is also huge - if you aren’t getting many showings or you’ve had multiple showings and no offers, you will need to make adjustments.

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Want to know more about the current market and where it's headed? Get in touch - I love talking about real estate, learning more about your goals and seeing how I can help!