A Cracking Market in Todays Real Estate Market

This time in real estate as a buyer or seller is scary, there are headlines that are shown on TV, social media and all other outlets that shout this is going to be a really bad year. As a person that is looking to jump into the real estate industry this is a good time because there are a lot of things that people are seeing and hearing that are not correct.

As inventory is in a great place compared to a crashing market. If you look at the inventory now in the link verse the inventory back in 2007 which was about 4 Million homes on the market, that means a lot less homes than before to go around. From the first article from National Association of Realtors to where we are today, we are 3 Million plus homes off that market right now. This begs the question, is it a smart time to buy and sell a home.

Let’s think about what you are doing in this market and speak to each person individually. Let’s start with buyers for the sake of higher interest rates. Is this a right time to buy? Well, let’s see what the factors are for everyone in buying are right now. There are a couple things to think about in the market. There are basically 1 million homes (970,000 to be exact) on the market right now and back in the crash of 2008 we had a total of 4 million homes on the market. That is a total of three more homes per buyer looking back then, now we have one fourth that amount on market.

What does this all mean?

Home prices will not fall as dramatically as they did back in 2008 because the data shows that the inventory is still low compared to back when the flood of REOs and short sales hit the market. Will you as a buyer get a huge price reduction from the seller when making an offer and will there be a for sale sign on each house of the block to affirm your low offer. No, but there will be more sellers out there because of the changing market that are willing to negotiate then the past three years. That is great news for home buyers the past few years. If you are a first-time home buyer with a small down payment, 3% or a 5% down payment you will be able to ask for things like closing costs back for costs to buy down the interest rate, or simply to ask for your closing costs to be covered by the seller. Currently home buyers have paid up to about $7,000 on average the past few months for rate buy down that could be easily placed on the seller to pay in this market. Sellers are willing to do a lot more these days and buyers should and need to take advantage of this because sellers that need to get out of their home have more pressure than a person that has significate equity and job stability.

For home sellers it’s the other side of the coin that they face. They are willing to negotiate more due to higher interest rates and longer timeframes on the market. Sellers, now have the realization that they need to be flexible for what the buyer’s needs are and their affordability pressure is on them. The inventory is tighter than years ago so sellers do not have to drop their pricing down to 50% of what they bought it for; however, they will have to be willing to take a haircut on some of their equity. The equity that was build up over the course of the last year totaled $34,000 nationally per Core Logic, and that is only one of the years that contributed to higher housing costs. This data only shows a small glimpse into what homeowners have been rewarded with by owning the past few years. Sellers have a lot of equity as property values fall to get where they need to be short selling or giving their property back to the bank; which I do not believe will be coming as the data shows.

Do we continue to Fall?

Sellers are willing to negotiate on their home and not give it away for a huge amount of money off their asking price, that would be a resemblance of 2008-2012. The inventory is tight and there are many properties hitting the market now, we are still under the 1 million homes; however, this is not a big change from 870,000 homes on the market in February 2022. That means that there are roughly the same number of houses and the pace of sales has slowed only because the rates of the market not the increase in inventory. The sellers can be stricter with their own pricing because the full bottom has not fallen out and will not even with the slower inventory coming on the market.

Well, overall, the next year to two years we’ll see an evening of pricing, and even a smaller growth between prices of homes and the tick up of the interest rates. The interest rates are attacking homeowner affordability which is eroding the housing prices. If this was combined with inventory raising significantly then we would have a huge problem. We do not have that as an Issue.

Some buyers and investors will be able to get a deal if they wait and are patient long enough through this turbulent cycle and keep up with local markets where they are investing. As the market continues to put pressure on people with large credit amounts and higher debts there will be more homeowners willing to cut their homes loss to save their bacon from foreclosure or bankruptcy. Those are the opportunities that the investors and current buyers will see in the market.