What a difference a few months can make! We began the year in one of the most competitive real estate markets in recent history, bolstered by low interest rates and low inventory which led to escalating competition and over-list-price offers.

Then everything changed in the Spring as the Feds began to raise interest rates faster than ever to combat inflation. Below are some stats and my thoughts on some of the questions my clients most frequently ask.

How much have prices dropped?

Median sales price actually rose year-over-year across most of the 26 counties in our MLS. October's median price was $595,000, an increase of about 3.5% from last October, but a decline of approximately 9% from May 2022 when prices peaked at an all-time high of $660,000. Your neighborhood might have performed differently.

Will prices continue to drop?

We'll only know by looking in the rear-view mirror. Predicting the top or bottom of the market is a fool's errand. Even the best real estate economist get this wrong every year. The factors that really move markets are often not ones we can predict (e.g., The Pandemic, War in Ukraine, inflation and the Feds' response, etc.)

Are we now in a Buyer's Market?

We're far from being in a Buyer's Market. We have been in a Seller's market since early 2012. We're still in a Seller's Market with 2.2 Months of Inventory, so it would take only 2.2 months to sell every home currently for sale in our MLS. 4 Months of Inventory is considered a 'balanced market' and 5+ Months of Inventory is considered a Buyer's Market. Click here to see how your neighborhood has performed.

Are homes now selling slowly?

This October, homes in our region sold in 13 days (on average), which is still quite fast, but it's twice as slow compared to last October when most properties sold during the first week.

But average statistics don't tell the full story because today's market is bifurcated. While some listings come on the market and sit for many weeks, others come on and immediately sell, often with multiple offers and above the asking prices. Yes, quick sales with multiple offers are still happening. Homes that are well-priced, well-marketed, well-presented, and well-represented by great brokers are still selling well.

How do interest rates affect the real estate market, exactly?

Every 1% point increase in mortgage interest rates reduces a buyer's purchasing power by about 10%. Since January, interest rates have increased by almost 4% points, so buyers relying on a loan have lost almost 40% purchasing power! Well-funded cash buyers have also lost significant purchasing power due to sharp declines in the value of stocks and cryptocurrencies.

How are buyers reacting?

Some buyers have been priced out or are choosing to sit on the sidelines to see if interest rates and/or home prices will drop. Ironically enough, these are often the same buyers who have been hoping for some relief from the hyper-competitive market of the last few years. Many of these buyers will miss out on incredible properties with motivated sellers.

Other buyers continue to search but have become much pickier now that they've been forced to shop at lower price points with some going as far as only purchasing what they feel is a 'good deal'.

The return of purchase contingencies, particularly the Inspection Contingency, is widespread, so it is important to have a broker on your side that has training in real estate negotiation.

How are sellers reacting?

Reluctant to give up the low-interest rates they locked in the past two years, many would-be sellers are actually choosing to remodel instead of selling.

Those who are struggling to sell are slashing prices to entice buyers. Others are listing their properties for rent. However, this has flooded the rental market, which has seen an increase of 46% in listing this October compared to last October.

I am advising those who have to sell to consider creative financing ideas such as interest buydowns, seller terms, and checking to see if their current low-interest mortgage is 'assumable' by a buyer.

Choosing a professional real estate broker with superior marketing, property presentation, and negotiation skills is key in this market.

Final Thoughts

We knew the pandemic-induced pace and appreciation of 2020 and 2021 were unsustainable. At some point, it had to slow down. Frankly, I am surprised it took this long. I would describe the last two years as an 'unhealthy market' for all involved, so I am thankful the market has calmed.

To be clear, this is no '08. If making comparisons, today's market pace is starting to resemble that of 2017-2019, which was a good market.

For buyers hesitant to buy in this market, remember that 'time in the market' almost always beats 'timing the market'.

Whether selling or buying, I'd love to guide you through your next real estate journey. Reach out today!