Dane County Housing Market Update - July 2022

July 2022 - Dane County Market Update

Summer is in full swing, which means campfires and cookouts, vacations, festivals and swimming. But this year, summer also brings with it concerns about inflation, rising interest rates and that big, scary word "crash". Depending on where you place your focus and energy, it can be a really scary world out there, and let's face it, most media outlets are doing a really good job promoting that drama.

When it comes to real estate, what's really happening? Are we really going to crash or is now really a bad time to be in the market? Let's take a closer look at what's driving our market in this month's Dane County Housing Market Update.

Mortgage rates have been a big player in this year's market, and rightfully so. Many buyers have found themselves priced out of the market, not necessarily due to rising home prices, but due to the significant increase in rates that we've seen since January. At the beginning of this year, if you could qualify for a $1,500 per month principle and interest payment, that also means you could have bought yourself a $445,000 house. Today, that same $1,500 in principle and interest only gets you a $330,000 home. That's over a hundred thousand dollars in purchase power that this theoretical home buyer lost. And a lot of people are in that boat. Quite frankly, it's a tough, tough pill to swallow.

The good news is that rates have crept back from that 6% mark with many local lenders, and most experts expect that we've peaked for the year. This means that many home buyers can regroup and plan with a new normal in mind. It's very unlikely that we're going to see the 3% rate that really drove demand these last few years anytime soon. There's still hope for the budget conscious home buyer as some local lenders still have adjustable rate mortgages that you can find for under 4%. That is a great opportunity for someone looking to maximize their purchase power in today's market.

The last thing I want to point out with rates is something you've probably heard before, but that's because it's true. Yeah, we had it really, really good for a while. And for people that purchased or refinanced into 3% or even lower, good for you for taking advantage of those market dynamics. But big picture with where rates are today - it is still cheaper to borrow money for your home purchase than every previous decade, with the exception of the last 10 years.

It's all about perspective. With rates taking some buyers out of the market and inflation hitting our pocket books, plus the huge increase in prices over the last few years, does that mean we are heading towards a bursting bubble or a crash? Not exactly. Headlines will say a lot of things that can cause confusion, but no signs point to us actually heading towards a market crash.

In Dane County we are certainly seeing some shifting, but that's not uncommon for this time of year, and it's somewhat seasonal in what we've started to expect for our summer months. This time of year, we're seeing the impact of so many home buyers starting their process right away at the beginning of the year with that mid-winter/early spring market. Others have tapped out because they're exhausted or they've been priced out with the interest rates. Some people have resigned leases, and there are many people that are simply just enjoying the beautiful weather and taking advantage this summer.

Because June numbers aren't in yet, we're going off some anecdotal evidence and some of our experiences and conversations that I've been having with agents about what they're seeing and what they're feeling out there. But in just the last few weeks, it certainly feels like I've seen a higher number of homes hit the market, go through that first weekend and still be available on Monday or Tuesday without getting an accepted offer over the weekend.

We actually had a home buyer with 5% down and a subject to sale - which means they had to sell their house in order to purchase a new one - get an accepted offer on a property. And that is something that we haven't seen a whole lot of, if at all, over the last two to three years.

Keep in mind, that markets are driven by supply and demand dynamics. Through May, Dane county listings were up 15% while sales were down 8% over the same time last year. That's good. That's shifting us back towards balance. And it'll be interesting to see where this shift continues to go and how it moves.

Big picture remains that we have way too far to go to get to any level where we can start being concerned about depreciation or lower home prices in our market before that actually happens. Even a potential nationwide recession doesn't mean that home prices are going to go down. Looking at this graph, you can actually see that home prices increased during four of the last six recessions.

So what does that all mean for you? Is it a good time to be in the market or not? Well, look, if you want to buy a house, go buy a house. There's absolutely no sense in waiting to do so. If rates do come down, you can always refinance into the lower rate. And there's no data anywhere that shows that we're going to see home prices depreciating or going down anytime soon. Which means this; if you are in the market to buy a house, if you are planning to buy a house, if your goal is to buy a house, the longer you wait to do so, the more of a hit it's going to take on your pocketbook. Prices will continue to go up, which means your monthly payment will continue to go up, and it's going to cost you thousands of dollars over the years to wait.

Sellers, you'll be fine for the near future. The days of 300 offers and $400,000 over asking price competition may be dwindling, but it's still reasonable to expect competition and a quick home sale if you do things the right way. Also, remember that real estate is always local. So depending on what price point you're in and where you live in Dane County, your experience may be slightly different than the market at large.

For more tips, tricks and updates, make sure you follow us on social media. And as always, if you have any questions about your unique situation, give my team a call. We'd be happy to help. Let's connect soon.