The Rising Cost of Everything: Real Estate Sales Plunge Amid Soaring Mortgage Rates
Housing market activity slows statewide, including 50% drop in sales in Teton County
- Published In: Other News & Features
- Last Updated: Oct 18, 2022
By Shen Wu Tan
Special to the Wyoming Truth
Bomber Bryan, associate broker with Keller Williams Jackson Hole Real Estate, is seeing a 50% decline in real estate transactions in Teton County compared to last year as the housing market slows amid increasing mortgage rates.
Through June 2022, 213 real estate transactions were completed in Teton County, down from 427 through June 2021.
Bryan estimates the dollar value from sales of single-family homes plunged 42% in June 2022, compared to June 2021, which is the latest hard data for the county.
Housing in Jackson Hole was already out of reach for many home buyers even before mortgage rates spiked. The median price of a single-family home in Teton County as of June, the latest data available, was $3 million—nearly 10 times both the $320,000 median price of a home in Wyoming and the $367,621 median sale price of a home in the U.S., Redfin figures show.
“Certainly, my income has been affected equivalently to the market compared to a year ago,” said Bryan, who works on commission. “I think every realtor can probably say the same, some to higher degrees, some to [lower] degrees if they’ve had some great sales this year. But if it continues, I think people’s savings will be probably tapped into for most normal, working-class real estate agents.”
He added, “Any profession where you rely 100% on commissions and sales [are] fabulous when things are going great and can be really ugly and rough when things are not going so great. You have to curb your expectations and hope you have a decent crystal ball and not overspend if you are anticipating leaner years ahead.”
The effects of higher mortgage rates
New property listings exceeded closed transactions in Teton County last month, a phenomenon that last occurred in June 2020, according to Bryan. The county also saw a slew of price reductions. For example, one home located on E. Golf Creek Lane in Jackson—on the market for 63 days—dropped its price by $100,000 (or 4%) to $2,295,000 as of Oct. 17. This aligns with a national trend: Nearly 8% of home listings slashed prices during the four-week period ending Oct. 9, data compiled by Redfin shows.
Rising mortgage rates are to blame. The weekly average rate in the U.S. for a 30-year fixed rate mortgage as of Oct. 13 was 6.92%, figures from Freddie Mac, a company that operates in the secondary mortgage market, reveal.
“Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April of 2002,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously.”
The Federal Reserve is expected to raise interest rates by at least 1.25 percentage points before the year end, which will cause mortgage rates to jump even higher.
“It creates a situation where affordability becomes less for the average homeowner,” Bryan said. “Higher interest rates definitely have an effect here and in normal middle America, whether it’s the rest of Wyoming or in the middle of the country where prices aren’t nearly as high as here.”
While mortgage rates are now at a 20-year high, they’re nowhere close to the 16% to 18% rate that was the norm in the 1980s.
“And historically, 6%, 7% is pretty reasonable, but when you had a taste of [3%] to 4% and it’s now gone, it’s hard to swallow for some buyers,” Bryan said.
Jim Edgeworth, broker and owner of the Edgeworth Real Estate Firm in Casper, told the Wyoming Truth that houses are staying on the market longer now than they did before June 1, because some buyers are reluctant to purchase homes until interest rates go down.
“We have inventory that makes it easier for buyers to go out and purchase a home,” Edgeworth said. “On the sellers’ side, they have to be a little more negotiable in today’s market than they would have 12 months ago or even seven months ago.”
Some sellers are willing to pay buyers’ closing costs as an incentive to seal the deal. One of Edgeworth’s clients is offering to cover three months of mortgage payments to convince a buyer to purchase the property. Edgeworth said buyers are securing adjustable rate mortgages, rather than fixed rates, in hope that the rates will decline.
In the Casper area, real estate transactions as of October plunged 15% compared to last year, and more listings are sitting on the market compared to a few months ago, Edgeworth said. Before June, there were 46 active listings, but as of Oct. 17, that number had nearly quadrupled to 174 properties.
Some sellers in Casper slashed prices not long after putting their home on the market. A three-bedroom home along South Durbin Street dropped $20,000 in price to $515,000 – almost a 4% decline – and has been posted on realtor.com for 19 days. More than $40,000 has been knocked off the sale price of a five-bedroom home along East 14th Street; it’s now going for $498,000, nearly an 8% drop, and has been posted on the website for 26 days.
Cheyenne realtor Megan Barr, of the Megan Barr Group at EXP Realty, said some buyers are entering the housing market because of reduced competition and increased inventory.
“…So those buyers have a better shot,” Barr said. “We still have quite a bit of sellers coming into the market… They’re giving a lot more concessions right now than when the market was a lot more hot.”
Like Bryan, Barr sees new property listings exceed sold listings. From Oct. 1 through Oct. 17, there were 107 new listings, 422 active listings and 73 sold listings in Cheyenne. From Sept. 6 through Oct. 3, she said there were 57 new property listings and 39 sold listings.
As 2022 winds down, Edgeworth expects Casper to return to a more normal market, with an inventory of around 200 houses, unless something catastrophic happens. Although mortgage rates are higher, he urged home buyers and sellers to not be discouraged.
“If you want to buy a home, buy it,” Edgeworth said. “If you want to sell a home, sell it. And it will all work out, no matter what end of the fence you’re on. You can’t predict what tomorrow is going to be. The only thing I know for sure, buy it today. If the interest [rate] isn’t what you like, then you can always catch the downturn and refinance the home into a lower interest rate.”