The Norman housing market is no longer the frenzy seen in recent years due to increased interest rates, and local experts say while it may still be a sellers market, the pendulum could be swinging back to buyers.
Mortgage rates have climbed to their highest rate since November 2008, according to data released Thursday from Freddie Mac, a federally chartered mortgage company. Nationwide, lock-ins for 30-year fixed-rate mortgages averaged 5.89% this week.
Inflation over the last year is often attributed as a key factor, but its impact is indirect, according to SoFi. The online banking company said the dynamic between inflation and mortgage rates depends on how the Federal Reserve adjusts interest rates.
As the annual inflation rate in the U.S. climbed above 9% earlier this summer and currently sits at 8.5%, the Fed looks to continue rate hikes in an attempt to bring inflation down to the target of 4%.
According to Rocket Mortgage, the Fed has raised its benchmark rate by .025% in March and May, .075% in June and an additional .075% in July. The online lender predicts another increase in September and potentially November and December as well.
NASDAQ reports a .075% rate increase is likely this month. This would lift the rate above 3% for the first time since 2008.
Wally Kerr, owner and broker of Kerr Team Real Estate, said when the federal funds rate increases, banks will charge more for customers, thus mortgage and other loan rates also go up, though it’s not a direct correlation.
Kerr said the fed rate is an “overnight rate.”
“If money costs a lender 5.25% interest, they’re not going to give it to you for (that) because there’s so much volatility in the market right now, so lenders are always trying to speculate what the Fed will do next,” Kerr said.
The federal funds rate may see increases following each of the Federal Reserve Board’s final three meetings of 2022, but Kerr said that doesn’t necessarily mean mortgage rates will go up significantly in response to each of those policy decisions.
State of local market following rate increases
The Oklahoma City metro area saw 2484 home closings in March, 2714 in May, 2749 in June, 2546 in July and 2695 in August.
Kerr said the 8% sales decrease could be attributed to higher interest rates, which peaked earlier this summer at 6.1% in the metro area.
The average commitment rate in 2021 for a 30-year fixed rate mortgage was 2.96%. As of Sept. 1, that average is 5.95%, according to metro-wide Multiple Listing Services data.
While the increase has allowed for a bit of buyer flexibility, it’s still a sellers market according to some local experts, with purchases often finalized at or above list price.
Bryan Waldenville, owner of Meraki Real Estate, said given current conditions, it’s likely the market pendulum is swinging from the seller to the buyer.
“I would say that we’re bleeding into a buyers’ market,” Waldenville said.
After a significant period of low interest rates not seen since the Korean War and houses getting double-digit offers after just a few days on the market, Waldenville said sellers haven’t let go of the idea of selling under those conditions.
Additionally, buyers have heard about more houses coming on the market in recent months, though some point to an influx of houses in the higher price points as the reason for inventory increases.
The month’s supply of homes in Norman, an indicator of how long current inventory would last if no additional new houses were added, was 1.6 in July, a 33.3% increase year-over-year, according to Multiple Listing Service data.
“We’re finding that getting people agreeable and ultimately getting them to the closing table has not become difficult, but there’s certainly more work involved than there has been in the recent past,” Waldenville said.
While many who sold their home last year were able to do so with minimal improvements, Cody Simmons, realtor with Sunshine Realty and Rob Schaerer, broker and associate of Dillard Group Real Estate and 360 Realty, have seen prospective buyers exercise “choosiness,” as opposed to the 2020 and 2021 nationwide trend of making an offer sight unseen.
Single-family homes on the market in Norman averaged 14 days on the market until sale in July, a 3-day increase year-over-year, according to local MLS data.
In recent weeks, Simmons said he’s had sellers ask, ‘Why hasn’t my house sold after multiple showings?’
“I say, well this is normal for your house to have several showings and not receive an offer — that’s a normal market in my opinion,” Simmons said.
Simmons has seen properties under contract go back on the market due to financing issues, and he suspects some that could be attributed to interest rate increases.
Schaerer said the market still has plenty of serious buyers, though current conditions have “gotten rid of the tire kickers.”
Both Simmons and Schaerer say they are seeing some price reductions, however that’s not a sign that prices are falling across the board.
For now, it’s still a sellers market, Schaerer said.
“Buyers are still paying above list price for some properties, but we’re not seeing that so significantly, except the times when buyers perceive the intrinsic value of the property to exceed the list price,” Schaerer said.
Schaerer said an adjustment in perspective is increasingly prevalent this summer from sellers who previously heard about minimal efforts required to make the house seem attractive to prospective buyers.
“You’re going to get (offers) from the people wanting to negotiate if you don’t actually make it palatable for buyers that are coming through that don’t want to buy a house at the top of the market, pay top of the market financing and then have to put money into it,” Schaerer said.
For those considering selling their house, Schaerer said efforts such as ensuring baseboards, wall colors and light fixtures match and the yard looks well-kept, in addition to dusting can be the difference in finding that serious buyer.