Rates Rise, Demand Falters
Generally, the real estate market is like a large ship taking a long time to turn. Since the beginning of the year, the market has slowly shifted in favor of buyers and away from sellers. That slow moving erosion seemed to undergo a shift in September, when rates dropped and both buyers and sellers responded. Demand was up approximately 14% compared to this time last year. Given that it has been over 3 years since we’ve seen any improved year over year numbers, this was good news indeed. The caveat? Supply is also up – 52% over last year and up 3.7% in just the past week. Further, even though most people incorrectly thought mortgage rates would drop after the Federal Reserve cut their base rate – a stronger than expected economy and jobs report delivered the opposite. We now have the highest mortgage rates in 2 months.
Therefore, what seemed to be a fast moving demand trend in favor of the sellers quickly reverted to buyers being favored in most market segments thanks to the rising rates. Also, seasonally, supply grows this time of year throughout October and November – only to decrease as sellers come off the market in December. As the Cromford Report points out: “Buyers are still gaining negotiation power as supply rises… The general picture is of low volumes but stable pricing. The outlook is for volume to improve a bit and for prices to remain stable with a slight downward tendency due to the slight excess of supply over demand… Unless the trend changes direction we are headed toward a buyer’s market.”
The best strategy for sellers is hire well and get pricing and marketing right from the beginning. For buyers, recognize you have a window of opportunity to buy with stable pricing and choices. Both sides need to know their strengths and weaknesses.
Russell & Wendy Shaw
(Mostly Wendy)