The pandemic profoundly changed the real estate market over the last few years into a seller’s market. The demand for a “home of our own” skyrocketed for several reasons:
- Waves of first-time and second-home buyers entered the market.
- Already low mortgage rates were driven to historic lows.
- The forbearance plan all but eliminated foreclosures.
- Home values reached appreciation levels never seen before.
These years have been fondly called the “unicorn years.” By one definition a unicorn is “something that is greatly desired, but difficult or impossible to find.” Today those unicorns are no longer around.*
Once the Fed started raising interest rates, many expected home prices to fall drastically. Although there was some retrenchment, housing prices have continued to remain high and there’s a reason. There are simply not enough homes for sale and that means we are still in a seller’s market.
The Supply of Homes is Stuck
A recent report from the National Association of Realtors (NAR) shows that housing supply is astonishingly low. Housing inventory is measured by the number of available homes on the market. It’s also measured by month’s supply, meaning the number of months it would take to sell the available homes based on current demand. In a balanced market, there’s usually about a six-month supply. Today we have only about a three month’s supply which is no where near a balanced market. Lawrence Yun, NAR chief economist has stated that the market can easily absorb a doubling of inventory.**
Even with higher interest rates there are still buyers out there, but their choices are limited. Current homeowners who have benefitted from their existing low-rate mortgages are hesitant to sell. These “rate-lock homeowners” would have to finance their new home at a much higher rate than their existing one, adding hundreds to thousands of dollars to their monthly mortgage payments.
Benefit for Sellers
The current market conditions give sellers a real edge. There are buyers out there who are ready, willing and able to purchase a home. And, because there’s a shortage of homes for sale, the ones that do hit the market are like magnets for those buyers.
One small compensation for today’s buyers is that although this is still a seller’s market, the market isn’t as intensively competitive now. That’s because many buyers have bowed out of the market. If you’re a seller, you have a huge advantage as your home will be in the spotlight for motivated buyers. If you’re not sure if you should sell or wait, check out our blog from August – Should you sell your home now or wait?
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