Interest Rates, Covid and our Current Real Estate Market
Anyone who follows the market, or is buying or selling real estate knows this year’s market is very slow compared to the past several years. As a Realtor in Reno I monitor market data and economic news. Interest rates are higher than they have been in decades, which has reduced buying power. That translates to fewer buyers. The greater Reno area is still having a healthy influx of people due to new jobs in technology, warehousing, associated jobs, and a growing dissatisfaction with California living. There is still a relatively healthy demand here as opposed to many other cities.
Inventory continues to be low compared to ‘normal.’ That typically forces prices up in a market with a healthy buyer pool not encumbered by high interest rates. I monitor pricing and there are daily price reductions at all levels of the market. This is far different than the Covid-spawned years of overbidding and endless offers.
Interest rates are key to buying power as is the inflation we have seen the past two years. Many owners are enjoying their current low interest rates. Even though they may want to move on or up, there is a big disadvantage to selling a home with a low interest rate and buying home with a high interest rate. This is all common sense of course. For most people, the simple desire to move is not motivating enough to sell right now. When the rates do fall, I believe we will see a lot of action in the Reno/Sparks market helped along by owners just waiting for that one change.
This market is similar to the late 1980’s regarding interest rates. Back then (and I was there to see it) interest rates got up to 18%. It was shocking! Our current 7% and 8% rates are shocking to people who have enjoyed buying homes with highly manipulated low interest rates the past several years. I remember when interest rates dropped to 8% in the 90’s and thought that rate was an incredible deal. I liken the past few years to people having access to free money and I do not see that happening again any time soon.
I believe people were so frightened during covid that they wanted to be anywhere else but where they were. People wanted to move away from the current situation in search of safe haven. I closed sales with only facetime walkthroughs because the buyers did not want to view homes personally. People were also searching for spaces conducive to working from home.
Unlike the covid years, we are not in a Seller’s market and Buyers are not buying sight unseen or waiving repairs just to beat the numerous other offers on the table. It is not really a sellers’ or buyers’ market. I feel as if we are in a type of limbo.
Real estate markets go up and down. That is what they do. One of the great things about owning real property is that it is a finite resource and will ultimately appreciate. We are in a unique situation in our country that allows us to own land and the home that sits on it. Until we colonize the moon and the ‘final frontier’ of space, we have only so much land. That makes for a great long-term investment. Hang in there. It will get better.
Fedprimerate.com Historic Interest Rates
