𝗠𝗮𝗿𝗸𝗲𝘁 𝗕𝗹𝘂𝗲𝘀
As we approach the year-end a market shift is underway. While sellers retain a slight advantage in most markets, supply has begun to rise at the fastest rate since last year. All while demand continues to erode. Every day the strength of the market is moving in the buyer’s favor. It is no mystery why this is happening: interest rates. Rates have hit their highest levels in 20 years. This is having a predictable impact on demand. With demand eroding, homes for sale begin to linger on the market causing the count of active homes to rise. All of which adds up to “less”. Less market activity resulting in less sales. According to the Cromford Report, listings under contract fell this month another 8.6% from the dismal level last month. Closed sales were also anemic – dropping another 11% from last month.
As we approach a balanced market (which could happen as fast as the first or second week of November), the gentle upward pressure on prices also appears to be nearing an end. However, to be clear, at the moment prices are not declining. The Cromford Report sums up the current market condition thusly:
The seller market is weakening in the wake of rising mortgage rates as we head into the 4th quarter.…This is not a reassuring situation for sellers and their confidence is much weaker than it was a couple of months ago. Buyers have a better negotiating position but those needing finance are increasingly dismayed at the cost of their monthly repayment. Both sides are unhappy, leading to weakening transaction volumes and lower closing rates. This spreads the hurt across all sectors of the housing industry.
So what are Buyers’ and Sellers’ path forward given the market headwinds?
Our best advice is as follows:
𝗦𝗲𝗹𝗹𝗲𝗿𝘀
1. Price your home for where the market is going to be in two months, not based on the past two months of sales. The market is moving – your price must move too.
2. Be prepared to pay seller concessions (i.e. money to buy down the buyer’s interest rate). Last month 45% of all transactions included sellers paying towards buyer costs. That percentage is likely to go up. Builders are having great success with buyers currently due to their willingness to “buy down the interest rate”.
3. Get your home “show ready”. In other words, when buyers have more choices as they do now – the homes with the least amount of needed work sell the quickest and for the most.
4. Don’t fall for below market investor offers. When markets begin to lean away from sellers – too many sellers fall for the “sure thing”. Investors pay 25-30% below market value. If you want market value – you have to be on the market. Price to the market. Yes it may be less than you hoped but it still 25-30% above any investor.
𝗕𝘂𝘆𝗲𝗿𝘀
1. Typically, the best time of year to buy is right now. You have the lowest amount of buyers in the marketplace (your competition) and the most choices (homes for sale) than any other time of year. Don’t miss the negotiation strength that confers on you.
2. Date the rate, marry the house. Realize as a buyer, the interest rate is what is happening now. Get the seller to help buy down your rate and wait to refinance down the road when rates improve. If you found the right house, get it now while you can.
3. The spring buying season is March- June every year. Buying when everyone else is buying is not the best negotiation strategy. If you can do it now, do it (see point #1)
What will the market look like in 2024? The truth is that predictions more than a month or two out are nearly impossible. Many have a theory that “markets are always good in an election year”. We have never seen anything other than antidotal data to support that popular theory. As the Cromford report shares:
A year ago, the market was looking very weak and few people imagined that $/SF could possible go up 3% in the following 12 months. This reinforces how unpredictable the market can be when looking more than a couple of months out. The best that can be done with math is a well-defined interpretation of the trend during the next 8 weeks or so. Right now these 8 weeks are not looking rosy. Just remember we felt the same way in October 2022.
Different price points and geographic areas can vary in supply and demand – creating micro- markets within the greater market. If you are thinking of buying or selling – don’t hesitate to reach out to us with questions about your specific home sale or purchase. We are always here to help.
As this year ends, we thank you for being our friends and clients. We wish you a most joyous holiday season.
Russell & Wendy Shaw
(mostly Wendy)