The Change Has Come!
In our last quarterly real estate market update, I noted how the inventory, (that’s the number of homes listed for sale) had grown for two quarters in a row. We were waiting for one more quarter to see if this was an uptick that would go back down or the beginning of a real change in the market.
Well, the numbers are in and inventory in most markets has increased significantly in the quarter just ended. In some markets, the increase is very significant. The inventory in Antioch is up 53%! In Pittsburg, it’s 94%! Bay Point is 58%! We can say now that the market is definitely changing!
The numbers also say that prices are still up. However, those numbers have not caught up with what is actually going on in the market yet.
Here’s our take on what’s happening. People selling and buying homes is a matter of behavior, not just statistics. The statistics are driven by that behavior. We noticed differences developing in the behavior of sellers and buyers starting about June.
We saw more and more buyers dropping out of the market. Just giving up on trying to buy a home. Prices were getting to the point that they just could not afford it. Also, there was much frustration at having to bid against other buyers to get a home. They just had enough.
We call that the buyers “hitting the wall.” We knew it would happen one day, but it took much longer, and the market went much higher than we thought it would.
We are seeing homes sitting on the market much longer now. Many homes not selling until the sellers reduce the asking price. We are seeing fewer multiple offers. We are seeing those only on homes that are real stand-outs in excellent condition and proper pricing for the market.
People selling and buying homes is a matter of behavior, not just statistics.
We are seeing buyers, in many cases, not offering to buy at or over asking price. They are offering less than asking price.
When the statistics catch up with this activity, we’re expecting to see median sale prices finally level off or come down. The effects won’t be equal in all price ranges. There will always be a price range that will stay stronger than others.
From what we’re seeing, the higher end of the market is being affected most quickly and dramatically. What plays out will also depend on location.
Besides hitting the price wall, increases in mortgage interest rates will affect buyers’ behavior as well. Actually, it changes that price wall. Though interest rates are still near historic lows, they have risen a bit and are showing signs of more to come.
Each tick up in mortgage interest rate, means a buyer who could qualify for a loan to buy at say $500,000, might not be able to do better than $450,000. You can see how dramatic an effect that will be!
The question is how significant this phase will be. Will there be a “soft landing” of prices? Will prices drop some and level off? That’s what we would like to see. Or will they go down significantly for an extended period of time before leveling off? We don’t have an answer for that. However, we are ready to work with whatever market we’re in.
We knew this would eventually happen. After all, we’ve been in the business more than 25 years and have been through several market cycles. We know how to serve our buyers and sellers at every stage of a cycle.
Some buyers and sellers are going to try to wait out this cycle and sell when prices are going up again or buy at the bottom of prices going down. That is, “time the market”. Here’s our experience on this. They never time it right. By the time they think the market has changed to what they want, they will have missed it.
Here’s a fact. No matter what the market, some people must sell, and some people must buy. There are many other factors affecting what they do besides just home prices and what those prices are doing.
Even in markets where prices have leveled or are dropping a bit, sellers can still have quite a lot of equity, if they have not borrowed it all, and will still come out with plenty of cash. Buyers, if they have a very savvy real estate agent, can still get good deals.
Here’s some advice. Whether you want to buy or sell, now more than ever, it is important that you have a real estate agent who has been through this before and knows how to best serve you.
Think about this. A tremendous number of real estate agents working out there right now got their licenses after 2013. They have never experienced any other market than the one that is ending now. That is constant increasing prices and low inventory. In fact, we are getting calls from a number of these agents asking us how to deal with this market. The lucky ones are ones we are mentoring directly.
So, you decide to hook up with an experienced, savvy real estate agent like Libby. Good decision! The next vitally important thing that is necessary to best handle this market is trust. You must trust your agent’s experience and believe what she tells you.
If you trust your agent and price your home where she tells you, and you prepare the home as she suggests, you will have the best shot at a quick sale while all the others in your neighborhood sit on the market.Homes that are real stand-outs, in excellent condition and properly priced for the market will sell.Click To Tweet
Those homes sitting on the market are actually “chasing the market” as we call it in the business. The seller was either given no advice or bad advice or did not listen to their agent’s advice and priced the home too high for the market.
What follows from here will typically be this;
- They will eventually reduce the asking price, but not enough because the market has dropped below that level.
- The house sits for more weeks.
- The market drops more.
- They reduce the price more but are too stubborn to reduce it to where the market actually is, and it sits unsold.
- Some will take the home off the market and not sell at all.
- They have missed their opportunity.
Some will finally get the price to where it needs to be and guess what! They have actually gotten much less than they would have if they had done what their real estate agent had told them at the get-go.
We have seen it over, and over, and over again. That’s another behavior effect.
So, that’s where we are. That’s how you can best deal with it if you need, or want to sell or if you need, or want to buy. If so, give Libby a call at 925-628-2436. She can definitely help you out!