What do the current economic conditions mean for housing prices?

If you are going through a divorce or planning to sell your home for any reason, you may be curious how rising interest rates and market uncertainty impact housing prices now and in the future. It’s a time when many homeowners are questioning whether it’s the right time to sell or even buy a new home post-divorce. Denver real estate expert, Shirley Jenkins, recently provided some insights on what to consider relative to housing prices in the current market conditions. In this post, Shirley answers four top questions you likely have in mind if you are considering selling your home in your divorce.

How have rising interest rates impacted housing prices?

Rising interest rates impact a buyer’s purchasing power. Every time interest rates go up, purchasing power decreases. For example, if someone is pre-qualified for $500K and interest rates go up even a quarter of a point, they now only qualify for about $485K, a fraction of that $500K. This dynamic can slow the housing market out of fear and slow home purchases because a buyer can’t afford the type of home they desire.

Has an increase in interest rates been offset by a decline in prices?

While it might seem like this should be the case, it is unlikely that we’ll see a decline in prices even with rising interest rates. This will vary slightly based on neighborhoods and price points with more competition. Similarly, interest rates aren’t impacting inventory like you might expect. 

Because real estate is hypersensitive to neighborhoods, mainly due to school districts and tax implications of certain areas, prices can be relatively stable in popular neighborhoods which have a great reputation, low inventory, and homes of a desirable age. This makes pricing a home difficult and you may have to test the market to find the right price in such a volatile market.

Where do you expect interest rates and home prices to head through the end of this year and into 2023?

Experts in the field believe that the market won’t change that much in the way of home prices over the next year, but interest rate hikes will likely continue to happen. The market will be somewhat status quo, with most trusted advisors predicting one interest rate hike still this year and one at the beginning of next year. Interest rates of 5-7% will become the new normal and will likely settle in the mid-6’s within the next 12-18 months.   

What else is important to know about selling a home in this environment?  

Keep market perception in mind, which can be a confusing phenomenon. Buyers and sellers perceive the market almost always six months in arrears. In other words, they perceive market conditions that were a reality six months ago. This leads to sellers being shocked that they can’t list their home as high as they would like. It’s difficult to keep up with the reality of real estate at the pace it changes. Said another way, it takes about six months to shift perspectives to actual market conditions.In these confusing and unpredictable market conditions, it is critical to find a realtor who truly trusts and understands how this market impacts your ability to buy and sell real estate, especially if you are going through a divorce. Amy Mahlen of A.M. Financial can support your decision by providing insight into the financial aspects your budget and what you can afford in this volatile market. If you have additional questions about the Denver real estate market and what to expect from this real estate market, contact Shirley Jenkins to learn more about how she supports clients in their real estate needs.