Are higher interest rates the only reason?
Sales are lower than last year but even with higher interest rates, sales numbers might be higher if there were more homes available for sale.
Last year home sales were higher than normal because interest rates were low and expected to increase. Buyers were hoping to buy before rates got too high. Because, if in 6 months buying will be more expensive there’s an incentive to move fast.
But now that interest rates are higher we are still seeing a lot of buying activity. Why?
Here are a few reasons –
- some buyers think rates will be even higher in a year
- some buyers know that rates are higher now but they are only around the 100-year average. We could say, current interest rates are average. These buyers see it as a good time as any to buy.
- and, some buyers are learning that, even with higher interest rates, a mortgage might still be more affordable than rent. Because rental vacancy rates are very low now and rental prices are increasing.
With home sales higher than expected and fewer homes for sale, buyers are having trouble finding the right home. Because of this, we are seeing competing offers and higher prices, and if everything remains that will continue.
Home sales in Red Deer have been slower in 2023 than in 2022. In 2022 buyers were rushing to buy as interest rates increased
In 2023 home sales slowed but so did the number of homes for sale. Overall home sales were down 25% in April compared with April 2022.
However, with the super low inventory levels right now, sales might be higher than they are.
There aren’t enough homes for sale to satisfy all buyers and this should cause prices to creep upward.
Inventory levels are lower than I’ve seen throughout Central Alberta – SEE THEM HERE.
Why is inventory so low and how come, if it’s such a great time to sell, more homeowners aren’t listing their homes for sale? Higher interest rates have an interesting impact on home sellers too
- homeowners wanting to sell know that if they sell they’ll end up in a higher interest rate mortgage on a higher price home.
- when you sell one home and buy another, most of the time you have to re-qualify. And with interest rates higher some owners wouldn’t qualify at the higher rates.
There is one thing a homeowner who wants to move in the future should consider. If low inventory drives home prices higher, the next home will not only have a higher-interest mortgage, but it will also be less affordable. Even with interest rates high buying a bigger home now will likely be more affordable now than in the next couple of years.