Spring is here, and the real estate market holds promise.
This is the time frame where anyone interested in either buying or selling their home will be strongly represented. They will research everything they can about the neighborhood, schools, property taxes, and other factors, to form their decisions and to make offers. Many of them will hire a realtor to get them through the process of homeownership.
What may prevent buyers and sellers from reaching closing are the interest rates. At one point, the interest rates hovered between 2 percent and 3 percent. This rate enabled owners to refinance their mortgages to save money and further invest in their property. As the rates increased to 8 percent or more, there was little to no movement to initiate change. That translated into a stagnant market, even during the winter months.
Peter Brown, Realtor for eXp Realty in Cranston, is one person who believes that there is some good news coming, as the weather gets warmer.
The Federal Reserve is contemplating a reduction in interest rates, encouraged by diminishing inflation and receding recession concerns. Should monetary policy ease, mortgage rates could decline from their recent highs, potentially invigorating the market.
Brown said that this could be welcome news for those who have been waiting to make their next move.
“It was a frustrating few months for everyone who deals with the (real estate) market,” said Brown. “There was so much conflicting information out there that it made people wonder what to think. With the new year and the possibility of lowering rates, there should be better prospects for the coming months.”
According to Brown, there’s a noticeable uptick in supply as 2024 begins, offering more choices in the housing market. Available housing numbers around Rhode Island have been significantly low. To have a balanced market, there needs to be roughly six months worth of inventory, which is about 5,000 homes. The prevailing numbers have hovered between 500 and 1,000 homes, or about one month’s worth. The figures are much lower for multifamily homes and commercial properties.
Despite these positive signs, challenges persist, particularly concerning affordability. Brown said people should be optimistic about the near future but cautious as well.
“Home prices have outpaced income growth, making it difficult for prospective buyers to enter the market. However, demographic shifts and post-Covid housing preferences continue to drive up demand for single-family homes. While this trend may keep prices elevated, it could also positively impact the apartment market, especially with potential reductions in interest rates affecting rental demand,” he said.
Brown added the recent dip in mortgage rates provides a ray of hope for potential buyers. With inflation on the decline combined with the Federal Reserve’s potential rate cuts may further reduce mortgage rates and encouraging more buyers to enter the market. Although affordability remains a concern due to significant home price appreciation, the gradual decrease in mortgage rates could drive a recovery in the real estate market over the next few years.
Brown foresees a lot of activity happening within the market over the next several months.
“Looking forward, I think we can anticipate a gradual improvement in home sales, albeit constrained by affordability issues. While lower financing costs may stimulate some recovery, the gap between home prices and incomes remains a significant hurdle. Nonetheless, with a stable macroeconomic environment and strong underlying demand, supported by factors like household formation and evolving housing preferences, I think you can expect ongoing activity in the real estate sector,” Brown said.
Brown also believes the potential decline in mortgage rates offers hope for the real estate market. However, challenges related to affordability may moderate the pace of recovery. Nevertheless, with favorable economic conditions and shifting demographics, the real estate market presents opportunities for both buyers and sellers.
For sellers, Brown reiterated the need to hire a realtor who can help with the process. He noted what they can provide in terms of what and how to showcase their property.
“Ensure that their home not only looks good outside, but that it looks like it’s ready to move into,” he said. “Lawns should be mowed and hedges should be groomed. Inside the home, it should not be cluttered or have other issues. You must put your best foot forward to impress potential buyers.”
For buyers, they need to be pre-approved, so that they know what they can afford. Also, they should prepare themselves to attend multiple open houses, and connect with a realtor who knows the area. Not knowing what the competition has on their side can be detrimental.
Additional information about the current real estate market trends can be obtained by contacting Peter Brown of eXp Realty at 401-601-7480, or at peter.brown.143879@exprealty.com.
