By Thomas Carroll, REALTOR®
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September was a big month! Annual price appreciation has slowed to a much more normal pace of 4% across the state. The outsized numbers are now being seen in units sold which are down 24% year over year in Maryland. Despite the decline in the pace of transactions, we have not seen inventory climb. The total number of units in active inventory has also fallen year over year by 25%. Months of inventory available now sits at 1.2 down from 1.5 this same time last year. For historical context, in September 2019 (pre-pandemic stimulus) active inventory was at 3 months across the state.
Why is this happening? It is hard to say but I think there are two main reasons. The first is interest rates. They hit 7% in September which represents a 20 year high and 130% increase since the beginning of the year when they were at 3%. What does this mean for Marylander’s? For current homeowners, if they are locked in at a much lower interest rate, this is a disincentive to move and explains why inventory has continued to fall. For potential buyers, it decreases the amount of home they can afford, as banks have debt payment to income ratios they must adhere to as they lend. Here’s a table to illustrate the difference in monthly payments for new home buyers at these elevated interest rates:
| MD’s Median Home Price | Down Payment | Interest Rate | Monthly Principal and Interest |
| $390,000 | 20% | 3% | $1315.40 |
| $390,000 | 5% | 3% | $1562.04 |
| $390,000 | 20% | 7% | $2075.74 |
| $390,000 | 5% | 7% | $2464.95 |
As you can see, this change in interest rates has really affected affordability and makes a sizeable difference in the monthly payment that future homeowners will face. The second reason I think we have seen a sizeable shift in the housing market is that people are nervous and rightfully so. Every homebuyer is old enough to remember the 2008 housing crisis and we are collectively terrified that it might happen again. In my next article, I’ll address this sentiment and talk about what home buyers can do to set themselves up for success. As always, if you or someone you know is looking to buy or sell, I would love to help or if you just want to talk real estate feel free to reach out! I look forward to hearing from you and thank you for reading.