Whether you are a seller or a buyer, you are probably looking at the current market and asking, what happened?
Looking back even just a year ago, things look dramatically different. The red-hot market during COVID had many factors that contributed to a seller’s market. With COVID, people who could work from home, did. In working from home they found they needed more space and that a commute time no longer mattered.
Interest rates hit a low that most never thought would happen, contributing to the overbidding on homes. Part of that overbidding was driven by the limited supply of homes for sale. Sellers understood that while they were in control of the sale of their home, they would be on the other side of that on a purchase of a different home, regardless of where in the country they bought.
More first-time homebuyers were able to break into the market partly because their purchasing power increased due to the low interest rates. Some took advantage of the low rates to purchase second homes. On top of all that, there was a lot of stimulus money helping people.
Current times looks very different. The Fed is behind the 8 ball in getting inflation under control and continues to raise interest rates. In January 2021 rates were about 2.65%; rates in October 2022 were about 6.95%, lowering purchasing power for buyers and prompting sellers who don’t need to sell to sit tight on their lower interest rate mortgage.
For the sellers on the market, buyer demand is below pre-pandemic levels, which is causing the time on market to increase.
The housing market is Econ 101, and a rebalancing is in process. The bottom line is home ownership is needed in order to accumulate wealth. Many economists think that 6.5% interest rates will become the norm. Rent costs will not go down and home prices are not accelerating at breakneck speed.
There are numerous options for sellers and buyers alike to consider in this current market. Consult with your local Realtor — they will help you explore all your options. The long-term benefits of homeownership for everyone is the prize to keep our eyes on. Don’t let the moment scare away your dreams; instead find the opportunities.
Karen Domnitz is a Realtor, DRE#00897503, with Century 21 Award and vice president of the Ramona Real Estate Association, rrea.org
