What To Expect From The Local Market This Fall

This week the CDC enacted a new eviction moratorium only days after the previous order expired. This one is slightly more limited in scope, though 80% of counties are expected to be affected by the order. The new order is specifically targeted for areas that have substantial or high rates of COVID-19 (you can read the CDC order here). As we discussed last month, it is not likely the order will stand up in court. However, the uncertainty caused by continual changes in policy will cause a lot of difficulties for property owners and tenants.

Despite the new order, locally we expect to see a few foreclosures and investment properties hit the market in August. These are primarily properties that began proceedings prior to the moratorium’s start in 2020. There will continue to be a slow increase in properties coming onto the market through November. By then, most who started the eviction proceedings in early August will have emptied and fixed up properties and be ready to sell. In the Rockford area, it is common for 6-10% of inventory to be foreclosures. For the last year and a half, that number has been closer to 1%. The increase in pent up inventory of foreclosures along with the slow rise of equity sales will raise inventory that has been historically low over the last couple years. This will (and has already begun to) cause prices to level off and homes to stay on the market a few days longer. If you or your clients are planning to sell, now is the time to take advantage of high prices while inventory and days on market are still low.

These market changes are good news for exhausted buyers who dropped out of the highly competitive market. An important metric for buyers to watch is mortgage rates. Mortgage rates are expected to begin a very slow increase toward the end of the year and into 2022. Rates have been unusually low over the last couple years which has been a huge relief for borrowers. Mortgage rates can often end up being more important than sales price. For example, a $150,000 home with 2.98% interest (the average rate in July 2021) has a monthly payment of $631. In contrast, to achieve the same monthly payment with 3.77% interest (the average rate in July 2019), the borrower can only purchase a home worth $136,000. The change in interest rate allows the 2021 borrower to afford $14,000 more than only two years ago.

In short, now is the best time for sellers to enter the market and a borrowers to consider re-entering the market. 

For more information, give us a call. Our goal is to empower our clients (and yours!) to make intelligent real estate decisions.