When you are in the business of selling real estate, it’s sometimes hard to say what’s going on until you have the data to prove what might be just a feeling. And each of us as independent contractors working for a brokerage has a unique look into the marketplace. So when we have a chance as agents to meet and talk about what’s going on today, it is always a great opportunity to learn.
Last week I met with a number of seasoned professionals in my RE/MAX office. We all shared a similar outlook. We are seeing fewer showings on listings, and are writing fewer deals. And today only certain segments of the market seem to be thriving. The homes that are in very good condition and are very well priced can still see multiple offers. That tells us that buyers are still willing to write offers, but are very selective on what they are purchasing. We are also seeing an inventory reduction in large million dollar plus estate and vineyard parcels. We know, therefore, that there is serious capital on the market looking for a worthwhile investment.
What else do we know? We know that the interest rates we have enjoyed in the past few years are going away. The 3 – 4% rate is gone and we are creeping into the 5%+ territory. That’s a Real Estate Downshift. While this may not seem like a huge difference to a buyer, it is enough to cause a market on the edge of affordability to slow down.
With little to no new construction in our area, existing home prices have increased based on lack of supply. And since that increase has far outstripped increasing incomes here, that interest rate change further erodes the affordability of our area.
Higher interest rates and more expensive inventory has increased the time homes are sitting on the market. We now have about a 3 to 4 month supply. That means a Real Estate Downshift that buyers can take a bit more time deciding what to buy, sellers need to negotiate more and have their properties in tip top shape, and instead of listing their home $5000 higher than their neighbor sold for last month, they may need to underprice their home by that amount because there are 2 other properties also for sale on their street.
A downshift from a pure sellers market to a more evenly weighted transaction….I’d say 5th gear to 4th for sure, and possibly even to 3rd gear as we take the turn ahead.
The great news is that sellers are still achieving sold equity returns on their homes when they do decide to sell. Possibly not what they had hoped, but if priced competitively, their home will sell. No one is making any more of them in North County right now.
I’ll have some solid statistics for you at year end.