It seems like everywhere I go lately people are asking, “So, is the market softening?” Honestly, it’s the number one question I’m getting right now. My answer is, well, that depends.
Full disclosure, I’m not an economist or mathematician, but I do have access to some interesting data, so let’s dive in!
Many people are talking about the fact that they’re seeing listings sit on the market longer than they’ve seen listings sit lately. However, in Tippecanoe County, we have LESS inventory than we did one year ago. That’s right—we had 190 active listings on November 1 of 2021 versus 186 active listings as of October 31 of 2022.* So, that means an influx of inventory that is just going to sit is not a huge concern right now, and if you’re selling your home, there isn’t going to be massive competition for it.
But let’s talk about some other numbers. As of October 31 of 2022, 20 homes went under contract, 32 homes were listed, and 26 homes were sold in the week preceding that date. Those numbers are substantially lower than they were during that same period in 2021 (by around 50% or a little more in the case of homes that went under contract).
So, what gives here? Well, it’s all about interest rates. At this time last year, rates were 3.56%, and now they’re around 7.22%. Interest rates have more than doubled during this year alone, and that has a huge effect on monthly mortgage payments.
For example, if you’d purchased a $300,000 home in January, current interest rates mean you’d now pay about $710 more per month for the exact same home. When you consider that utilities, gas, groceries, and just about all the other daily necessities are costing more as well, there’s not a lot of room for a bigger mortgage payment in many budgets. In other words, our buyer pool has shrunk because fewer people can afford homes right now. Nationally, the median mortgage payment is about 77% higher than it was a year ago, and most of that increase is from interest rates. For payments to return to where they were a year ago, home prices would have to drop significantly (around 45%), which nobody is predicting even with an economic downturn.
If you are looking to buy, it’s a good time to be a homebuyer because although it’s still very much a seller’s market and supply is still lower than normal levels, there will likely be an eventual increase in inventory. Also, those crazy bidding wars are lessening. The average number of offers on recently sold homes is declining, according to the National Association of Realtors.
If you’re buying or selling in Greater Lafayette, Indiana, I’d love to be your #IndianaRealtor! Give me a call today at 765-427-7000.
*Per the IRMLS 10/25/21 to 11/1/21 and 10/24/22 to 10/31/22.
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