Your opinion: When will transactions pick up?

Question

January apartment transaction volume, tracked by total dollars traded, ranks as the slowest month since the pandemic lockdown period in spring 2020 (MSCI Real Capital Analytics). This is about what everyone expected, a natural reaction to elevated rates.

When do you think that transactions will pick up?

When do you think that transactions will pick up?

Brad Jacobson · Answer

I imagine transaction volume will steadily rise as people become more comfortable with the 6-7% rates.  However, affordability is at an all time low so I doubt we'll see a dramatic increase in transaction volume until rates come back down.  January's inflation numbers weren't good either so it's unlikely we'll see lower rates again soon.  Sellers will need to keep coming down to match the in-affordability created by bad fiscal policy since Covid.

Dana Yost · Answer

The insane lack of inventory is a major issue here and a big contributing factor IMO in what we're seeing with recent bidding wars. Things may have slowed for awhile, but prices really have not adjusted that much either.

I've personally bid on a handful of properties in the last 4-6 weeks in particular that went into crazy bidding wars (which I refuse to engage in, unless I can justify the numbers, but these were properties that were priced well to begin with). One a couple weeks ago received 26 contracts. Another last week got 18. Several others though that I've submitted on went into multiples within the first 24-36 hours on market and accepted contracts well above list. The inventory being what it is- anything priced right (even things needing gut remodels) seem to still be going under contract almost immediately and at prices that often leave me shaking my head.

Brett Deas · Answer

I think in my market specifically, seasonality is not a thing. Since Denver is a higher priced market, interest rates affect it more. Right now, not many people can afford the interest rates so spring selling season is going to be very much muffled. IMO this market is rules by interest rates, so transactions wont pick up until those rates go down.

Theresa Harris · Answer

I think it really depends where you are.  I track two markets and right now, they are flipped.  The one where prices are normally higher and things sell at a good pace is slow and the one with lower prices has things selling fairly quickly.  The timing is also a bit off as the less expensive market is usually busier in May, not Feb which is the middle of winter for that one.

Patrick O'Shea · Answer

It seems people are anticipating rates falling before prices do. I can't predict the future, but at least one of those two things need to give for transactions to increase. Prices don't always go up and I believe historical rates have averaged around 6-8%.

Ben Rhodin · Answer

Going to disagree here, Denver definitely has seasonality, It disappeared during Covid, and came back intensified last year. We typically see a drop off in Listings and Buyer demand during the fall and winter, until the new year hits. January was painful, with our lowest month on record.However, we have seen an increase in demand since February started, I have had numerous clients, and colleagues that have experienced bidding wars and properties being gone within the first weekend. Still not as competitive as Covid times, but overall higher movement since the rate hikes happened. People are coming out of the winter slump and realizing that rates aren't going anywhere. Yes, high rates are pricing certain people out of this market, but we still have an influx of people in Denver, and people will simply move down in price brackets. Sure the luxury space may take a hit, but the overall market will stay resilient in my opinion.

David Mackin · Answer

The Pending Home Sales Index (PHSI) was up 8.1 percent in January. In December it was up 2.5 percent.January did see a slight dip in rates, so perhaps a lot of people hopped off the fence to take advantage. Now that rates are back up to about 7%, it will be interesting to see if pending homes sales continue to increase. Inventory continues to drop as well, so that's a whole other issue to tackle.

Your opinion: When will transactions pick up?

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