With high mortgage rates, could listing price drops in Elk Grove foretell a cooling housing market?
Over the last several years, real estate prices have swiftly increased nationally and in Elk Grove. While price increases continue, there are signs that the growth rate could be slowing.
The most significant reason for the lower increases is higher mortgage rates caused by the Federal Reserve. The prime rate hike has 30-year mortgage rates this week at 5.51 percent, up from 2.67 percent in December.
The higher interest rates make mortgage payments larger, which could cool demand. So even though housing will continue to be unaffordable for many families, lower demand will theoretically slow the rate of increase or possibly lower prices.
According to Zillow, home prices in Elk Grove's 95624 zip code grew 21 percent. The city's other two zip codes, 95757 and 95758, experienced similar growth.
While Elk Grove housing prices are forecast to increase over the 12 months, some evidence suggests that too may feel the effects of higher mortgage rates. According to Zillow notifications, many houses listed for sale in 95624 have had price reductions from their original listing prices.
As seen from the list below, at least 29 homes listed for sale in 95624 over the last month had price reductions from their original listing. While these deductions could be a function of prices set beyond market conditions, they could indicate that mortgage rates are affecting demand.
It's too soon to gauge what effects higher mortgage rates will have on price increases over the next several quarters. Nonetheless, the frequent listing price drops could indicate that the market is changing.
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