As interest rates have continued to increase throughout Q4, the market in Clark County has shifted in line with the rate hikes set forth by the Fed. Combined with high asking prices, some would-be buyers have been priced out of the current market. This has led to a decrease in demand and therefore, an increase in homes sitting on the market for weeks.
This spells good news for buyers, as sellers have softened asking prices, decreasing the median sales price. As buyers continue to juggle high mortgage rates, inflation, and the current economic climate, Q4 has seen the market shift slightly away from the sellers’ favor in an effort to attract new clients to the market.
Median days on market have noticeably risen since Q3 by 41%. When compared to Q4 of 2021, it’s an increase of over 70 percent. Compared to the days on market in 2019, homes for sale in Vancouver are beginning to emulate their pre-pandemic numbers which may indicate a shift back to normal balance within the market.
Median Sales Price
There has been a moderate dip in the median sales price during the final quarter of 2022, from $560,000 to $549,995. This 2 percent decrease shows that the demand for homes is cooling as interest rates are expected to continue rising throughout the new year, as indicated by Jerome Powell, Federal Reserve Chairman. Compared to the median sales price in Q4 of 2021 of $514,487, the increase during the most recent quarter amounts to 6.5 percent.
As the Federal Reserve attempts to curb inflation, economists expect continued interest rate hikes in accordance with the likelihood of a recession, with Cleveland Fed President Loretta Mester projecting an increase to above 5%. Sellers expecting a quick sale may find themselves waiting longer than expected. Homes must be priced with these market fluctuations in mind to attract potential buyers.
With the Fed expected to raise rates again in February 2023, median sales prices in Q1 are sure to shift again. Buyers will likely find that median sales prices decrease as interest rates increase.
Number of Homes Sold
Between the third and fourth quarters of 2022, there was a dip of 535 homes sold. Going from 1,754 homes sold to 1,219 equates to a drop of 31 percent. The dip between Q4 of 2021 and this year is even more extensive, coming down from 2,300 — a 47 percent decrease. While this steep decline may seem worrisome, it can be chalked up to the market attempting to balance itself after a period of increased demand, rising inflation, and growing interest rates.
Inventory has not yet reached a balanced state, which would be six months’ worth of homes on the market at a given time. The market continues to shift towards more neutral territory, though it’s still leaning towards being more favorable to sellers. Demand is beginning to come in line with supply, resulting in slower sales and decreased asking prices.
From a wider point of view, this quarter has seen fewer homes sold than any other quarter in the past four years. This is a clear indication of the market cooling as buyers are being priced out and that many who wanted homes over the past few years were able to secure them. This has resulted in less demand for homes on the market and fewer sales overall.
Median Days on Market
The fourth quarter saw a continuation of the trend from Q3, with an increased number of days on market from 16 to 27. This 40 percent increase means that sellers are waiting longer for a sale, which can be chalked up to higher asking prices, increasing mortgage rates, and buyers who are grappling with a variety of economic factors.
With the median days on market nearing pre-pandemic numbers, this is an indicator that the housing market in Clark County is beginning to cool now that demand is no longer at its peak.
It’s not uncommon for housing markets across the nation to slow down during the fourth and final quarter of the year. Households are making preparations for the holidays, which may include family gatherings, vacations, and other expenses that tie up a family’s budget and schedule. This year, rising inflation has been a cause for concern and a contributing factor for would-be buyers postponing the purchase of a new home.
Mortgage Rates in Clark County
At the time of writing, the mortgage rates put out by the Mortgage Bankers Association are sitting at 6.42 for a 30-year fixed and 5.94 for a 15-year fixed at the time of this writing. These rates are expected to rise as soon as February 2023, when the U.S. Federal Reserve is expected to continue its efforts to curb inflation by increasing rates. Buyers and sellers should keep in mind that these rates are unlikely to begin falling anytime soon, so pricing decisions and timeframes for purchasing a home should be plotted out accordingly.
The Fed is expected to opt for an increase of 0.25 percentage points, up to 4.75 percent. However, there is also a reasonable possibility that a 0.5 percentage point hike will be in order.
With high interest rates being a contributing factor that may price a would-be buyer out of the market, sellers are faced with a decision to soften their prices to remain competitive with these individuals. Those seeking a quick offer will find that pricing in line with current interest rates can attract interested buyers.
Future Market Expectations (2023 Outlook)
Throughout Q4, the housing market has continued to shift away from a seller-dominated playing field, equating to more favorable conditions for buyers. First-time buyers should keep a close eye on the market and be ready to jump on a competitively priced home before the upcoming interest rate hike.
Fluctuations in pricing strategy, interest rates, and home sales will continue well into the new year. Buyers and sellers should both be aware that the next interest rate increase is likely to be on February 1, 2023. When rates are increased once more, there may be a slump in sales while the market attempts to find a balance.
Sellers should be prepared to find wiggle room if they’ve listed high, as the market is beginning the shift away from the times of buyers paying well over asking. Inventory may continue to remain tight, allowing demand to catch up and inevitably stabilize the market. As the Fed continues its fight to prevent a recession, the inflation rate will be key to both buyers and sellers in the upcoming quarter.