I want to bring some optimism to the conversation regarding the market. There are many reasons to argue that now is not the best time to buy a home. The Mariner’s lost, interest rates are at 20-year highs, inflation is high and there’s global uncertainty. In the midst of all that, there’s opportunity. Like Warren Buffet said, “be fearful when others are greedy and greedy when others are fearful.” Now is a great time to get into the market as a Buyer because there’s less competition, giving you more leverage in negotiations. Let me break this down…
Mainly driven by higher rates and high prices (although cooling), pending sales and closed sales are down -33-37% compared to a year ago. List price vs sold price data is much weaker as well. In February-March, listings were selling for an average of 10-11% over the list price. Today, properties are selling for -5% below the list price. The average time a listing sits on the market before it goes under contract is up 12 days. All of this activity suggests there are less buyers in todays market.
In the 9 years I’ve been selling real estate, I have never seen this many sellers advertise that they’ll pay closing costs. I don’t have specific data on this yet, but I look at a lot of listings every day and I’m seeing more and more of this in the agent remarks. On top of that, I’ve seen more “pending inspection” statuses. Flat out, this is the best time I’ve seen in my career to negotiate as a buyer.
I’ll be the first to say, I don’t have the magic crystal ball. My guess is this looming recession will be a mild one and won’t last long. Once interest rates come back down, like they historically have after every recession since the 1970’s (historical data), confidence will return to the markets and the buyers on the sidelines will return to the fray to capitalize. Once again, our market narrative will be “too many buyers looking for too few homes.” Yes, inventory is up 272% compared to a year ago, but this is misleading. We went from 0.6 months of inventory, this time last year, to 2.3 months of supply. Statistically that’s a big leap, but it’s still not enough to create a balanced market (4-5 months). If you zoom out and look at the last 12 years, you’ll notice that we’ve had an inventory problem since the recovery after the great recession of 2007-2008. This supply and demand imbalance is an unfortunate reality we’re going to face for years to come until big changes are made to incentivize the creation of more inventory. This is why I believe our housing market will return to its once competitive nature, not to the same degree, but competitive none the less.
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