What impact do the Fed’s interest rate hikes have on market activity?
It is more difficult to determine using sold data since there is generally a 30-day lag from the time a contract is executed to actual closing. But pending data provides a useful metric for market activity at a specific point in time. The graph above shows weekly new pending transactions graphed with the dates of Fed interest rate announcements.
Now that there is full-month “sold” data available for August, we can see how the month looks vs. prior Augusts.
Year-to-date, transactions are down roughly -16.3% across all price points. Price points below 750K are down around -25%, and homes priced above 750K are down roughly -1%. This is in part due to the shift from lower price points to higher as prices have appreciated rapidly over the last couple of years.
New listings have continued to decline since the huge spike in June. Remember my comment from last month… the number of new listings to enter the market in June (1,848) was the largest single-month number of new listings since April of 2010!
Since then, those numbers have declined and at the same time inventory has remained high, with the most active listings on the market since September 2018.
So, what’s going on right now? The number of homes going under contract is creeping up (see first graph in this post). The number of new listings coming to market is dropping. At the same time, price premiums have dropped, with homes priced above $1M on average selling for less than their asking price.
Later this month the Fed will meet and decide how much to raise interest rates again. That expectation may put pressure on some buyers to act before any additional increase goes into effect. But once announced, it could price more buyers out of the market and create more downward pressure on prices, particularly at lower price points.
If you want to make sense of what’s going on in the market or would like a better understanding of what your own home is worth, please contact me and I’d be happy to help you.