May 2023 Market
For May’s market update I want to look at mortgage movement and the impact of rates on our current and future market. Home prices are determined by supply and demand, in Bergen County there is an increased demand and decreased supply, thus driving up home values and creating bidding wars.
To recap in 2020 when rates went down to 3%, people who couldn’t buy a home before could now afford a house, so they bought one. This continued into 2021 and in addition to rising prices we started seeing terms that were extremely seller friendly. As rates increased some buyers paused their search, but in this area there was still a steady demand. In 2022 while the market calmed down, it was still a strong seller’s market. Properly priced homes were still going into bidding wars but they weren’t as intense as they had been and the terms greatly relaxed. Once we hit 2023, even though the rates were still high, the inventory was so low we we went back into 2021-like bidding wars with even more extreme terms and very little selection.
At the start of 2023, May was supposed to be our turning point, however in an expected and highly criticized move interest rates were increased on May 3rd. However we are expected to see mortgages slowly tick down as soon as May 10th - May 15th. Multiple experts are predicting rates will be around 6% by the summer and we’ll end the year between 5.5% - 5.25%.
So what does this mean for Bergen County’s real estate market? Lower rates will mean more buyers, more buyers will mean high home values. We have seen a large number of would be sellers (who also need to purchase a new home) not list their home due to the increased rates. Especially if they had refinanced around 3% getting a new mortgage around 7% was more than they were willing to do. The hope is that the lower rates will make it easier for these homeowners to upgrade to larger houses, so they will list their current homes and help with the inventory deficit. With a rise in both buyers and properties it really will come down to the new ratio of homes vs purchasers. If the majority of new buyers empowered by the lower rates either rent or are in a multi-generational living situation it will create a greater strain making it even more difficult for buyers.