It’s time to dig out that umbrella and do some of those housekeeping details that we love so much like cleaning out the gutters as the leaves begin to come down. In a normal real estate cycle, during the fall months we typically see fewer homes on the market as the holidays approach. But, this market is anything but normal or typical.
I could have told you what goes up eventually comes down – or at least slows down, but what I didn’t predict was the severity with which the interest rates would jump. While 2.75% wasn’t sustainable (congratulations to those of you who capitalized on those rates), who would have believed that just six months later we would exceed 7%? For those who aren’t looking to purchase a home, you may not realize what that does to a buyer’s payment but here’s an example. If I was showing you homes around $700K at the beginning of the year, you now may only qualify for $450K now based on the interest rate increases. And they’re not done raising those rates yet…
What has this done to our local real estate market? It’s obviously slowed things down. In October, sales were half as many as we had during the same month last year. The time it’s taking for homes to sell on average has tripled, going from an average of 7-10 days to over a month to find a buyer and sellers in most cases are fortunate to have one or two offers – certainly not a dozen or more that you’d receive during the pandemic.
Oh yes… the “pandemic”. That thing that happened that caused so many people to make a move to a more suitable home while we all hunkered down. Well, turns out some of those buyers are now feeling a little remorseful about what they purchased. At least their interest rates were low! But we’re also seeing people who are now wanting to make moves and are hopeful that their homes are still able to be priced higher than the last sale, but that’s not always the case. In our current market, 46% of sellers are having to reduce their prices before they’re able to successfully put their home in escrow.
Are prices coming down?? Not yet… but as sales continue to slump, my crystal ball tells me that it’s only a matter of time that we start to see some of that “pandemic pricing” start to wane. Real estate is all about supply and demand. During the pandemic, there was tremendous demand for homes. Sellers were able to capitalize on that frenzy, but right now the frenzy has subsided. People will always be buying and selling homes due to job transfer, divorce, death, or just your typical “this house doesn’t work for us anymore” situations. The key right now is that it’s not an ‘anything goes’ market. That’s why we’re seeing so many price reductions. Sellers aren’t giving their houses away, but they have to come to the realization that buyers do have some say in what they pay for a home, not to mention that banks are being much more cautious about what they are willing to lend.
So what does the future look like in local real estate? Well, we will still be standing tall when the dust settles. After 30 years in the business, we have seen many cycles and know how to weather the storm, but I do think that come January when real estate dues are due, there will be a number of part time Realtors who will exit the business. It’s considerably more work to sell homes (or should I say we earn our keep) during markets like this. I’ve gone back to paying for professional staging of homes and making sure that we’re the best value, not only in what we offer our clients but also helping our clients look their best to their potential buyers. I honestly like this type of market much more than the frenzy. Now it’s about providing the quality service that makes a difference – not who can write the fastest, non-contingent offer for a buyer who may become remorseful about their purchase.
While interest rates may not look desirable to everyone, life happens. People will always be buying and selling homes. I think the current pace will continue into next spring. Economists believe that rates will come down, which will cause more to jump into the market and those with the current interest rates to refinance. If rates don’t come down, watch for more homes to come on the market and prices to level off even further as we find a balance between home prices and what buyers can afford to pay. The reset won’t be comfortable but it’s necessary in order for us to return to a more ‘normal’ real estate market.
Be sure to watch for ‘Coffee with Carol’ a livestream on Facebook that will look at what’s happening in our local real estate market, keeping you up on the trends and giving you an opportunity to ask the questions that you want answers to. Send me a friend request and I’ll see you soon!
If you or someone you know is looking at the market and has questions, I’m here to help. I appreciate your referrals more than you know!
