Lately we’ve heard a lot of talk about the “bubble bursting” and an inevitable “market crash”. Well, the market is definitely shifting, that’s for sure and it all comes back to those interest rates that I bring up time and time again.
Now, currently inventory is still extremely low and we are still seeing multiple offers on many listings. But, based on recent data from the Metro Atlanta MLS (see charts below video), it appears that the feeding frenzy we have experienced over the past 18 months may be starting to slow down.
The reason, going back to the interest rates, is that many buyers have either had to adjust their budget or drop out of the home buying market all together because of the steep increase in rates.
Just to show you how drastically the rates have affected buying power, back in January of this year an $600,000 home would equate to roughly a $2500/month mortgage payment. However, as of April 21st, that same $600,000 home would have a $3250/month mortgage payment as a result of the 2% increase in rates over that four month period.
Many of the buyers on the lower end who were barely meeting the standard for pre-approval, have now been knocked out of the market completely. And, if you are selling that $600,000 home today, many of the buyers who were able to afford your home in January are now shopping in the $400k-$500k range.
This trend is what will cause inventory to increase and potentially cause a market shift. At the very least we are going to see the market level back out to where it was in 2019 as homes take longer to sell and buyers begin to have more options to choose from.
In the charts below you can see how interest rates effected the Atlanta market in the month of April. Closed sales dropped drastically in the time of year that is typically referred to as “selling season”. Inventory also rose in the month of April. Though only slightly, this is first jump up this year after 3 months of falling supply.