As the seasons change, the real estate market is already well into the slower fall market. October usually marks the time that many home sellers are in their final weeks of being on the market before they are faced with the decision of staying on the market during the holidays, taking it off the market and trying again in the new year or renting their property. Simultaneously, this is a period when investors and buyers get excited to go look for deals knowing that buyer demand is low and sellers on the market at this time of year usually need to sell (due to relocation, purchased a new home, tax implications, etc) instead of just wanting to sell.
After months of seeing inventory increase in the summer, we are already seeing inventory levels begin to decline (as sellers take their homes off the market and few sellers put their homes on the market). In September we saw interest rates go above 7% and, at the time of this message, have since retreated back to the high 6% range. Interest rates are clearly the most important factor influencing buyers decisions as their budgets were already stretched to their limits. Many sellers are facing the hard reality that they missed the boat on getting top dollar that their friends and neighbors received earlier in the year when rates were much lower and buyers purchasing power was stronger. It is going to take time for the market to balance and I believe interest rates are going to be the driving force along with the state of the economy moving forward.
If interest rates decrease to around 5% in the coming months, I expect many buyers to rush into the market and for pricing to stabilize. However, if interest rates continue to be in the 6%+ range, I believe prices will have to come down as affordability index is showing affordability near all time lower and many buyers no longer qualify with these prices and those interest rates. If you are going to try and predict the future and interest rates, the added layer to consider are what factors would cause interest rates to drop that much.
For the time being, it appears we have a standoff between buyers waiting for the prices to come down and sellers focusing on the market and prices from 6 months ago. The homes that are selling quickly right now are turnkey, in central locations, and priced correctly. However most homes are sitting on the market for weeks and months, even after multiple price adjustments. For sellers that need to sell in the immediate future, be prepared to negotiate more than you probably expected or be prepared to wait until 2023 and see what they market looks like at that time. For buyers, this may be a great opportunity to negotiate a great price on a home below what your friends and family paid earlier this year, but you will have to navigate lower inventory levels.
As always, every property, market and sub market have their own nuances. If I can ever be of help or if you would like to talk through anything, just let me know. In the meantime, enjoy this amazing fall weather!
- Geoff
