Real estate is one of the biggest investments an individual may ever make. The market conditions at the time when someone buys can have a lasting impact on their finances. Higher interest rates and increasing property values can combine to make purchasing real property prohibitively expensive in some cases.
Even when people can afford real property, they may struggle to make a successful offer on a property that meets their needs and fits their budgets. After years of soaring demand and increasing prices, the market across Pennsylvania has begun to cool a bit. What impact could this changing real estate market have on prospective buyers?
Declining prices can affect financing
In theory, a stabilization of real estate prices is beneficial for those hoping to buy. However, when prices surge and then drop, lenders may be anxious about funding transactions. The possibility of an appraisal gap is higher when buyers have become acclimated to competitive markets with higher prices.
Buyers may offer too much based on current property values and face a low appraisal that affects their eligibility for a mortgage. They may also need to secure more financing due to higher-trending overall prices. Although the growth in real estate prices has slowed, agents do note that prices are still up when compared with the market a year or two years ago.
Fewer transactions can affect inventory
Some buyers have begun backing off of the real estate market due to high interest rates and increasing property prices. Therefore, properties may take longer to close. Some sellers may decide not to list their properties for sale at all if they cannot command a premium price for the listing.
The slowdown in price appreciation might mean less inventory and could therefore translate into continued competitiveness on the market for the average buyer. Those making offers on real property may need to track the market carefully to ensure that they do not overextend themselves. They may also want how to carefully establish custom offers that include protective contingencies and other terms, such as a post-possession occupancy agreement, that protect their interests throughout the evolution of a transaction.
The slight slowdown reported on the Pennsylvania residential real estate market shouldn’t deter people from becoming homeowners. Having the right support and information when preparing for a real estate transaction can take much of the risk out of the process.
