Just as I finished writing the market update, breaking news occurred that has the potential to change one of the driving forces, if not the driving force, impacting real estate activity in our area and the nation as a whole. The Federal Reserve, as of 15 minutes ago (it’s now 2:15 on Wednesday afternoon, Dec. 13), has announced that inflation is slowing at a quicker rate than expected and in the coming year (2024) there will likely be cuts to the benchmark federal funds rate.
It has widely been discussed wherever real estate news can be found, and especially in this column, that the quick rise in interest rates is responsible for convincing many would-be sellers to stay put in their current homes. How, after all, could one justify giving up the 3% mortgage rate they currently have and be forced to pay close to 8% on whatever new home they may end up buying? We have all speculated that this phenomenon, known as the “Golden Handcuffs,” is the reason behind the dearth of homes coming to market.
As we near the end of the year, the data is showing a continuation of this extremely tight market, with homes popping up and almost immediately going under contract, oftentimes with multiple offers over asking price. Any discussion about what changes we can expect to occur six to eight weeks from now, when the early spring market gets underway, will now have to reflect the influence that lower interest rates will wield. Are interest rates really such a driving force? Is it possible that rates will come down and we will still see many sellers opting to stay put for reasons we have not considered? Perhaps, since covid changed our world and once in a lifetime events seem to be occurring every few months, people are just not as eager to move around so much. This slows the pace at which families transition in and out of neighborhoods. I’m sure many eager buyers who have been forced onto the sidelines would love to see lower interest rates push reluctant sellers into finally putting their homes up for sale.
As of today, regardless of the reasons why, the market remains quite stable in its trickle of houses coming on and almost immediately coming off the market. We will be watching closely to see if this late breaking news has an impact.
Nechama Polak is the broker of record and owner of V&N Group LLC, located at 1401 Palisade Avenue in Teaneck. Send your thoughts and comments to [email protected] or call 201.826.8809.