The Silent Housing Market Drivers

When it comes to discussing the housing market, most people want to focus on the supply/demand relationship. While supply and demand is a huge factor in determining whether we’re in a sellers’ or buyers’ market, there are also some “silent drivers” that affect the market. Let’s dive in.

If you were to solely look at the Kansas City area’s supply of homes, you would find that we have just over one month of inventory. For a market to be evenly balanced, we need about 6 months worth of inventory. So why aren’t house prices continuing to soar like they were during the pandemic?

Inflation. Shocker, right? We’re all feeling it! The first of two big silent housing market drivers is the overall effect of inflation. As prices increase on necessities such as groceries, gas, and everyday household goods, the amount you can put toward your mortgage budget decreases. “We used to be able to put $1500-$2000 away for our new house each month. Now we’re lucky to save $500. I guess we’ll have to wait a while longer before moving to a larger home”, Tamara discussed with her husband Scott.

The second silent housing market influencer is the rising mortgage rate. For every 1% rise in the mortgage rate, consumers lose 10% of their purchasing power. For example, Tamara’s family had been looking at $350,000 homes. The mortgage rate increased by 1%, so now to have the same monthly payment, they can only spend $315,000 on their home. They lost $35,000 in purchasing power that quickly! Rates have increased roughly 3.5% since last June. You do the math! “Tamara, let’s talk to our real estate agent and get their professional opinion on when we should buy”, Scott said. “That’s a great idea,” she said. “I don’t want to miss out on the lower prices, especially if we can refinance when the rates come back down.”

Team Real Estate has an experienced team of agents that are always happy to talk to you about the market and find the best solution for your personal situation. If you’re unsure of what to do in today’s market, contact us here.

Are there any other “market drivers” you think you’re seeing? What do you see changing in the coming months? Let us know in the comments!