The gap between demand and supply in industries could have its own zip code. This includes the housing market.
“The typical, traditional American dream is to own your own home,” said CSU Bakersfield Economics President Aaron Hegde Ph.D. “So it will always retain value.”
But when too many people want to make that dream come true, it can become a nightmare for hopefuls of housing, to buy something.
“We’ve had so many requests over the past few months, especially that there are finally buyers able to buy, but they were losing out to multiple offers on the listings,” said Phil Jordan, Senior Realtor at Jordan. Apartment Guys.
As Jordan points out, demand has been high and housing supply has been low, driving up prices.
From Thursday, interest rates rise. It comes after the Federal Reserve Board of Governors unanimously approved raising the interest rate by 0.75%. This is the Federal Reserve’s attempt to slow demand across all sectors, experiencing record inflation.
It seems that the supply is also starting to meet the demand. Just three months ago, there were 360 homes for sale in Bakersfield, according to Jordan. On Wednesday, there were 853. That’s more than double the inventory.
“It’s very common that spring and maybe summer is when most sellers want to put their house on the market, everything starts to turn green, winter is over, so you have a seasonal increase,” Jordan said. “The payment for a house is still $4, $5, $600 more than it was four or five months ago, but there are more choices.
With more options and reduced demand thanks to a higher interest rate, you’d think homes would become more affordable, but it could be more complicated than that.
Enter: The yield on Treasury bills, where expectations play a huge role in these high mortgage rates.
“Since in early January-July we already had data indicating that inflation was so high, the markets, especially the bond markets, expected the Federal Reserve to influence the interest rate, and they expected them to do so within three-quarters of a percent, Hegde If the Federal Reserve had fallen or not risen that much, then you would have seen a lot more volatility in the moves.
Add a higher interest rate to a higher mortgage, people could still see the price of homes taken away. Hegde recognizes that owning a home is still one of the best investments you can make, and there are some solutions there in addition to waiting for the market to improve.