As we end a year that saw the real estate landscape change dramatically, it’s time to recalibrate expectations about the newest “new normal.” We started the year with a strong seller’s market, with multiple competing offers escalating on the few homes for sale. The residential landscape has changed.
We have seen drastic interest rate hikes this year now hovering at the highest mark since the late 1990s. By the fall, concerns about inflation added to a drop in consumer confidence to put the brakes on the insane market we were experiencing. Homebuyers were frozen with concern and indecision.
The inventory data is the most important indicator. Real estate analysts peg a neutral market as having three to six months of inventory. In our neighborhoods, we were measuring that time on the market in days and weeks even into the summer.
As of this writing, we have 13 months of available inventory. That’s a huge change — and any change disrupts the way we think about real estate.
Where we are now
We’re in a genuine buyer’s market, yet so many aren’t taking advantage of it. The higher interest rates are a part of that — causing buyers to think they’ll pay too much for a home versus what they would have paid last spring.
Those interest rates were too low for too long. People got too used to mortgage rates of 2 to 3 percent. But, if you take a look at rates historically, a 30-year fixed mortgage was 14 to 19 percent in the 1980s. In the early 2000s, rates ranged between 7 and 8 percent. After the economic downturn in the latter 2000s, those rates were cut to stimulate home buying again. It worked, but it went on for far too long. When rates rose in June, that radical shift caused everyone to panic.
It’s time to calm down and get strategic. Whether you’re buying or selling, you can ride this market to your advantage.
What it means for buyers
Now is the time to set yourself up for long-term success. There are plenty of available homes, and if you can recalibrate quickly, you can make a long investment pay off.
We got accustomed to thinking of homes as short-term wealth generators, watching prices and valuations double within years rather than decades.
House prices are down, and there’s plenty of inventory to see. You can ask for, and get, all the standard contingencies and protections. There’s room to negotiate on price. I worked with clients who just bought a home listed for $1.5 million that would have sold for over $2 million just last spring. After negotiating, the final selling price was $1.2 million. Even with a rise in interest rates, that’s a great deal and a good investment.
Play a long game. All those folks who bought homes in the 1980s at double-digit interest rates refinanced when rates came down. I had clients who did just that and then sold to downsize in the past few years. They made millions on the sales. They played the market to their advantage, and you can, too.
Stop looking at the monthly costs, and think of the investment you’re making in yourself. When rates come down again — and they will — refinance.
Even though it’s a buyer’s market, choose your broker carefully. Find someone who’s succeeded in adjusting markets and can create and guide you through a strategy that will pay off in the long term.
What it means for sellers
There’s good news for sellers, too, if they’re open to hearing it. I had so many potential sellers tell me they wanted to move, to get a bigger house with more space for their growing families, but there was nowhere to go. They felt stuck because “there was no inventory.”
There is now. You may not get the selling price you saw estimated over the past few years, but you have to look at the market as a whole. The homes you’ll be looking at are also priced lower. That’s the advantage this market is giving you.
If you have to sell right now, be realistic about your pricing. It’s more important than ever to find a broker to work with you on competitively pricing your home for sale and who has a real plan and strategy for marketing your home. One that’s worked through market adjustments before. Though it’s tempting, this isn’t a good time to ask brokers to reduce their commissions. That only cuts into the amount a broker will use to effectively market your home; it’s a simple margin play.
We’ll see many homes come off the market for the holidays and into next year. So, if you’re selling, that increases your odds if your home stays active. While the pace is slower, people are still buying. We’ve done transactions on Christmas eve before, and we’ll do them again.
It’s time to recalibrate
The last six months have seen drastic changes in the real estate market. It can be unsettling, and you may have questions about how it affects you, your investment in your home, and your and your family’s future. My team and I have the experience and data-driven knowledge to answer your questions about where we are now and what the future may bring.
My team is one of the top real estate teams in the state. We have been successful in this market because we’re willing to be flexible and do the work that others won’t to get those wins for our clients. If you have any questions about whether you should sell, buy or just what’s happening, I’d love to hear from you. As a reminder, my home, my office and my team are focused here in Madison Park. If you’d like to set a time to talk through any matters involving real estate, my door is always open.
Chris Sudore is a Madison Park Resident; KingCountyEstates.com