Rather than discuss what I’ve heard or read about our market this year, I’d like to give you an update on what I’m personally seeing in different neighborhoods as I work with buyers, sellers and investors.
First, what I’d like to talk about is buyer fatigue. The market is beginning to shift, and prices have been climbing pretty high, pretty quickly for just over four years now. Buyer fatigue occurs when home buyers pull themselves out of the market due to high prices and decide to wait to buy a home until prices go back down. We’re starting to see a lot of this, and many of our clients have expressed concern over how high prices have gotten.
On top of buyer fatigue, another factor that has contributed to the market shift is the abundance of optimistic home sellers. We have between two and three months of active inventory on the market right now, which means that if no new homes are listed on the market, it will take between two and three months for all homes to sell at the rate they’ve been selling. Any less than six months of inventory is considered a seller’s market, so this figure, in combination with the historically-low interest rates we’ve been seeing, is causing some home sellers to overprice their homes. The problem is that just because interest rates are low, it doesn’t mean that buyers are willing to overpay for a property.
Buyer fatigue and optimistic sellers
are causing a market shift.
This, along with buyer fatigue, equates to a major disconnect in the market. This means that homes are taking longer to sell, and in many areas, I’ve personally seen homes sell for less than what the most recent home in the neighborhood sold for. For this reason, many areas are seeing a stabilization or a decline in home prices.
To add more fuel to the fire, interest rates are extremely volatile right now. Some might predict that rates are going to go up after the election and some might say that they’ll go up later this year or in 2017, but rates will inevitably go up, and it’s a rule of thumb that for every half a percent that rates increase, home values will have to drop 5% for your monthly mortgage payment to stay the same. This poses a dilemma for buyers about whether they should lock in low interest rates now and overpay for a home or risk waiting for interest rates to go up again.
What does this mean for buyers? If you are actively looking to buy a property, it’s my personal belief that by securing the lowest interest rate, you’ll be getting the best deal possible.
For sellers, it’s a great time to consider selling your home. If you wait until after the election and interest rates go back up, there will be less buyers on the market looking for properties in your price range.
If you’re looking to invest in a property, now would be a great time to get a loan, too. However, if you’re planning on buying in cash, you may want to hold off and see whether prices will stabilize or decrease in the future.
This is what I’m seeing on the market right now, but I know that every buyer, seller and investor has a unique situation. If you have any specific questions about how the market shift can affect you and your big-picture goals, please reach out to me by giving me a call or sending me an email. I’d be happy to help you.