What’s Happening in the Real Estate Market?
Not a lot of change in the market when you compare July and August numbers. Prices are flat but sales continue to happen. Some sellers are experiencing multiple offers when priced right with the current conditions. Others may sit on the market a little longer, then adjust the price to meet the market. Either way - homes are selling even with over 7% interest rates. Are we seeing a flood of cash coming to our region?? No, not like we were during the pandemic, but what we do see are sellers taking their equity and moving to homes that better serve their current needs. When a seller is putting a significant down payment because their home’s value has increased significantly over the past decade, those interest rates aren’t quite the bitter pill to swallow. They’re also taking advantage of Proposition 19 which allows them to transfer their current tax base to the new home.
What we’re not seeing is enough new home construction, except in some areas, but not everyone will want to move to the outskirts of town. This is where the resale homes are needed but not coming to market. Why? Why would they? If and when we see 5% mortgage rates, we expect to see a more normal market again but until then… this is the new normal for our real estate market. Some thought that we’d see a calming of the rates by the end of this year, but that’s not on the horizon. Rates seldom come down as quickly as they go up.
Let’s get technical for a minute – The FED has ‘maybe’ finally gotten what they wanted. I won’t bore you with the deep dive details but the guru’s are predicting that we’ve reached some key metrics that are satisfying what they (the Federal Reserve who control interest rates) wanted to accomplish. Look for the high interest rates to begin to show signs of cooling. I didn’t say going down, but perhaps not going much higher. Labor markets, bond markets, job numbers, student loan debt payments, inflation… What does this have to do with the real estate market? The short answer is if you were waiting for rates to come down, you’re going to be waiting awhile. For those who are waiting for prices to come down, you’re also going to be waiting… It's basic supply and demand. Fortunately, the demand for housing is stable but we continue to have inventory challenges. The variables have to change for us to see pressure on sellers to lower their price. Until that happens, it will continue to be a seller’s market.
Here’s a snapshot of what inventory levels have done over the past 5 years. The dark line are monthly closed sales and the light green was the available inventory. See a problem? The right side of the graph is today. We simply don’t have enough homes on the market to supply the need.
Until my crystal ball starts working again, I won’t predict how long we’ll be in this type of market but we continue to sell homes. Most people have no intention of selling their home, but some will. When you hear of those people needing a Realtor – we appreciate you thinking of us. We’ve been through many real estate cycles. This one isn’t as difficult as some we’ve been through. It’s a little more unpredictable, but definitely not the worst we’ve ever experienced. Just different.
