Market Update: How long will elevated rates lock in listings? |
Yesterday afternoon, the Federal Reserve announced another quarter-percent increase of its benchmark interest rate, the 11th rate hike of the past year-and-a-half. But there’s wide speculation this could be the final bump of this protracted battle against inflation.
The lending markets seem to have already anticipated and moved past this increase, focusing on positive news on inflation: Mortgage rates fell slightly last week after steadily increasing for the previous month.
For Indiana’s housing market, the big story of 2023 so far has been the impact of elevated rates on homebuyer demand and housing supply.
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We’ve discussed the “lock in effect” of higher rates on potential sellers, but some additional context from the first six months of the year:
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Indiana has seen demand rebound faster than the U.S. in 2023 as homebuyers (especially those with more budget flexibility) started to adjust to current mortgage rates and return to the market – statewide sales finished 14% below the first half of 2022, but NAR reports a year-over-year sales gap of 23%.
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But while home sales started quickly, activity slowed in the second quarter as inventory tightened and new listings flatlined – sliding further below 2022 even as median prices continue to increase.
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This is where Federal Reserve policies aimed at easing inflation by reducing demand have also deepened our persistent shortage of homes for sale: While higher rates have an obvious impact on homebuyers, they’ve also discouraged current owners from listing their homes for sale.
- After all, why surrender a sub-4% mortgage for the challenge of finding and financing a new home at rates near 7%, even with sale prices trending 5% above 2022?
- Limited inventory has held back the housing recovery, even though a smaller group of homebuyers are actively pursuing new options as they hit the market: Even with total transactions down, Indiana is averaging less than a week from listing to pending contract since the end of March with sales closing at 98% of their original asking price.
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Data Spotlight: Likelihood of Sale by Time on Market |
With just 1.5 months of available inventory through June, Indiana remains a seller’s market (familiar territory for the past seven years). But days-on-market trends and the close relationship between listing and pending sale activity (both averaging around 2,100 a week since early April) imply a stronger preference for newer listings among buyers in the current climate.
We decided to take a closer look at the likelihood of a successful sale for listings from 2020-2022 compared to 2023 year-to-date. The current median time from listing to pending sale is six days – and we find the odds of a sale decline more significantly this year as listings last beyond the first week.
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Click on the graphic to access an interactive chart (opens in a new window).
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Implications of the Data: |
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Generally, a slower market reduces the chance of sale, even though inventory is only modestly higher than last year: 77% of all listings ending in 2023 sold compared to 89% in 2020-2022.
- The longer a listing is on the market, the less likely it is to sell – this drop off is steeper in 2023 than it was in past years, most notably from 30-180 days.
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At 180 days, 51% of listings ending in 2020-2022 sold versus 44% ending this year – after 180 days, listings 2022-2022 dip below 50% sales and 2023 listings retreat even further.
- For seller brokers, the importance of aggressive early marketing is heightened this summer to capture the momentum that comes with (and then slips away from) a new listing.
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The stakes are higher for pricing discussions too; brokers need to bring a sharp sense of recent trends to maximize sales value while staying competitive and generating early interest.
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Over the first three weeks of July, we’ve seen listing prices rise to $266,000 while the median sale price ($255,000) is consistent with June sales; price drops as a percent of inventory are also increasing versus the first half of 2023 – signs that seller expectations may be running slightly ahead of the market
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Legal Q&A: Misinformation Mailbag |
The IAR Legal Department encounters a lot of inaccurate information and unfounded assertions floating around the industry; fortunately, REALTOR® members can turn to the experts if something doesn’t sound quite right. This Legal Hotline Q&A collects and corrects some recent inquiries to set the record straight:
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Register your team for the IAR Fall Conference - coming up September 18th in Indianapolis: |
Registration is now open for IAR’s annual Fall Conference (formerly Stakeholder Meeting) on Monday, September 18th at the Hilton Indianapolis. You'll want your brokerage well-represented for this day of industry insight, market intelligence and professional inspiration.
But accommodations at the Hilton are limited - make sure to reserve your room by August 18th to get your Fall Conference discount.
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Encourage brokers to take their careers to the next level with the GRI: |
IAR is relaunching the Graduate REALTOR® Institute (GRI) with a two-day, three-class event on August 7-8 at Indiana Wesleyan University on the north side of Indianapolis – there are still spots available!
We hope you’ll encourage your brokers – especially those early in their careers – to explore the GRI as a way to pursue professional excellence and deepen their expertise while building relationships and expanding their network among other rising REALTOR® colleagues.
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Indiana Association of REALTORS®
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