This Crazy Real Estate Market

[Bill Schrimpf]

@Dave Meyer - Thanks! Your On The Market podcast about "Lock-In" got me thinking about this and my local market.

We get a front-row seat to a real-life, unscripted Master Class on residential real estate supply and demand. I am a student, just as you are. The market is changing.

Supply is super low; demand is high, and the market is on FIRE, or it used to be! 30 days ago, listings at all but the highest price levels received several offers over asking price in a weekend, and buyers made concessions like skipping most inspections and paying the sellers closing costs to be competitive!

Pricing "strategy" for a new listing in Reno-Sparks over the past several months has been bananas! The not-so-strategic, strategy was to pull 45 days of comps, take the highest, add thousands, maybe tens of thousands, and that is the listing price. It worked.

In April 2022, 75% of transactions were financed, and 25% were cash, says the Reno Sparks Association of Realtors. With fantastic speed, mortgage interest rates moved from about 3% to about 5.25%! Assuming a buyer with good credit wanted to finance a median-priced home in Reno-Sparks with 10% down, the monthly payment increased by $700! That number has a real impact on household budgets and loan underwriting. Today, 13.4% of active MLS listings in Reno-Sparks have a price reduction. Demand is dropping.

What about new listings, e.g., supply? For those considering selling their house, what will they do next? Sell their current home that likely has a 3% interest rate to buy another at 5.25% or higher? Not unless they need to! Sellers won't sell until it makes sense for their household circumstances and budget. New home builders struggle with labor, lumber, and global supply chain issues. Supply stays tight.

This real estate agent, real estate nerd, non-economist, who does not own a crystal ball, has a gut feeling for the next few months. My gut says the Reno-Sparks market will remain a hot seller's market; however, we will stop skipping across the sun's surface! Supply stays tight, but demand drops. The day's question is how much and how fast demand declines.

As a Realtor®, I often am asked when is the right time to sell or buy. My answer remains the same. The best time depends on what is best for your family and your situation. Timing the market (and interest rates) for more than a few months often leads to regret.

For those of us that have been skipping across the sun in the few months, where do you think the market is going?