You’ve probably heard of some house in your neighborhood getting sold for well over its asking price because of multiple offers.
When there are competing offers, people don’t want their deals to slip away.
But when there’s no competition, things can work differently.
“Homes are sitting on the market longer now, so buyers realize they have more options and more room to negotiate,” says Heather Kruayai, a Redfin real estate agent in Jacksonville, Florida.
“They’re asking for repairs, concessions and contingencies, and if sellers say no, they’re backing out and moving on because they’re confident they can find something better.”
Higher interest rates make housing less affordable
To tame spiking inflation, the Fed is tightening aggressively. In June, it raised its benchmark interest rates by 75 basis points, marking the largest rate hike since 1994.
In July, the Fed announced another 75-basis point rate increase, bringing the federal funds rate to a range of 2.25% to 2.5%.
While it’s yet to be seen how effective rate hikes can cool down raging inflation, higher interest rates mean higher costs of borrowing – not good news if you have a mortgage. And that can change the decision of potential home buyers as well.
Redfin points out that a few months ago, mortgage rates were at around 3%. Today, the 30-year fixed-rate is at well over 5%. And that means someone who started shopping for a home several months ago may not be able to afford the same type of property they were looking at before.
Time to buy or sell?
Real estate moves in cycles. Given the recent developments, could this be an opportune time to take advantage of the market weakness?
A new survey suggests that sentiment is not exactly optimistic.
Fannie Mae’s Home Purchase Sentiment Index registered a reading of 62.8 in June, marking its lowest reading since 2011. Notably, 67% of respondents believe it’s a good time to sell a home, while only 17% of respondents think it’s a good time to buy a home.
Unsurprisingly, mortgage rates are a main concern.
“Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home,” says Fannie Mae’s Senior Vice President and Chief Economist Doug Duncan.
“With home price growth slowing, and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed: Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop.”
Fine art as an investment
Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.
That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.
Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.