Is the housing market crashing?
Like baggage in the overhead compartment, shift happens. And as we shift into a more balanced market, we will hear a lot of “The housing market is crashing” or “The bubble has popped” talk. I’ve said it 100 times; this is different than our last recession. If I’m wrong, IF I’m wrong, I’ll own up to it, but I really think your home values are pretty safe. I’ll try to explain below what the stats say and what I’m seeing in the day to day as a realtor.
We are seeing some big changes in the real estate market. The stats below are starting to reflect it but not nearly as much as we are feeling it. April gave us 810 new listings and we only closed 536 transactions bringing our Months Supply Of Inventory up to 1.2. This is the opposite of what we’ve started to consider the norm. With interest rates on a 30 year mortgage heading into the 5s last month, we saw a majority of buyers take a step back. Understandably so. The rate your lender quoted you in February is almost half what your rate would be today. This crushed a lot of buyers buying power. If you were searching for a home in the low 600’s you are now looking at a home in the high 400’s.
It won’t show it in the stats below, but homes are taking longer to go into contract. Buyers finally have some negotiating power and with all the new homes on the market they can start to be picky again. Surprisingly, even with the “high” rates, it’s not a bad time to be a buyer. Lots to choose from and you don’t have to offer up your first born child. Expect to see the Days To Contract increase to about 2 weeks next month AND List Price Received drop to under 100%.
I put “high” in quotations because a 5% rate is NOT crazy. It’s right where we were in 2019… remember… before covid. A shock to the system? Yes. Historically high? NO. That said, if we get into the 7s I’ll be a little nervous.
Over the next couple months listing agents will have to start pricing homes correctly again. We can’t just throw listings up and have the buyers bid each other up. Those days are gone. Sellers are going to have to start offering up seller credit to buy down the buyer’s rate. We are going to have to get creative as an industry and I’m excited to see how many of these brand new agents can hack it. I for one am pumped for this market shift and already have a lot of my buyers back in the game. My sellers will be successful because we will make the necessary adjustments in strategy.
Now, what you’ve all been waiting for: Is the value of my home going to drop like a Barry Zito curveball? Well, I will forever be an optimist so I’ll answer like this: We will see a drop in Median Home Sale Price. I believe we will see it for a few months straight. I don’t think it will be a drastic drop. I think it will take time for the buyers to get comfortable with the rates. Lenders will adjust and come up with new loan packages. Realtors will get smarter and start to negotiate again. There is still a lot of money moving into town and people are still moving here in record numbers. I think the drop will be temporary and we will move onto a more balanced and fair playing field. Time will tell, but I think we are alright.
Let the games begin.