November 2023 Real Estate Market Overview

Mortgage interest rates continued their steady climb towards eight percent, as the real estate market entered relatively rocky territory. The number of people seeking adjustable-rate mortgages (ARMs) also increased significantly, as more people sought more favorable interest rates for their purchases. However, demand for homes remains relatively high compared to available inventory, keeping prices high despite fears of a potential recession.

Mortgage Interest Rates Approach 8%

The interest rate for a 30-year fixed interest mortgage with conforming loan balances reached 7.76% in the first week of November, getting ever closer to 8%. This is seen by many as a critical milestone, with interest rates not having reached such heights in 23 years. This has many potential buyers reluctant to buy property, as interest rates push many properties into the realm of unaffordability for them.

Increased Interest in ARMs

Given how difficult it can be to deal with traditional fixed interest mortgages, many buyers have started to look at adjustable-rate mortgages, also known as ARMs, as an alternative. These mortgages often offer lower interest rates to start, but those rates can change over time based on market conditions. It is clear that many buyers are betting that interest rates will start to come down, making the choice to get ARMs a wise investment.

Housing Inventory Remains Low, as Do Sales

Part of the issues that many prospective buyers are facing is that there are still relatively few homes on the market relative to the number of buyers. Few homeowners want to sell their properties in the current market, and home builders have not kept up with demand for new properties. As a result, prices continue to remain high, even though the number of overall sales remains low.

Fears of a Recession Grow

The combination of high interest rates, high prices, and low inventory has some concerned that a recession may be on the way. At the very least, with prices now approaching the limit to what many prospective buyers can afford, it seems clear that a price correction may well be on the way. If that happens, it could result in serious problems for sellers who may be stuck with homes they bought at the height of the market.