A Seller’s Market will continue to prevail in real estate, BUT it is gradually transitioning from an out-of-control, insane pace to a more methodical, steady pace. This is good news for Buyers and Real Estate Agents who have been riding this run-away real estate train for the past 16 months. The number of homes for sale has nearly doubled since the beginning of the year, increasing selection and options for Buyers. Homes for sale are also spending more time on the market, giving Buyers additional time to consider and make a purchase.
Since the spring of 2021, home sale prices have rapidly increased, and homeowners have discovered increased equity. Some have cashed out on this new-found value and sold their home, but most have held onto their equity. In my case, I could sell my home that has dramatically increased in value over a quick amount of time, but where would I buy with inventory so low and prices so high? I believe that many homeowners / would-be-sellers are in the same boat.
Speaking of inventory:
- San Diego County homes for sale is at 2,648 – a huge leap upward from the 1,453 homes for sale on January 1 of this year. But I must put it in perspective: prior to COVID (2017-2019), the 3-year average number of homes for sale at this time of year of homes was 6,412.
- Orange County homes for sale is at 2,452 – a huge leap upward from the 994 homes for sale on January 1 of this year. But I must put it in perspective: prior to COVID (2017-2019), the 3-year average number of homes for sale at this time of year was 6,255.
I hear from speculators that the market is slowing down because of the “high” interest rates. However, the current interest rate of 5% is extremely low. If you don’t believe me, take a look at the interest rates over the last 40 years. During that time rates climbed to a high of about 19% and hit a low of less than 4%. The average rate since 1971 is 7.78%, still much higher than our current rate of 5%.:
After trying to compete (which is the correct word) in this crazy Seller’s Market, some of my Buyers have decided to “wait it out on the side lines”. Honestly, I do not blame them because it has been such a challenging season to try to buy real estate. As side-line spectators, will we see a huge drop in home prices? If only I had a crystal ball to predict the future! What I do know is that we don’t have all the ingredients for a Recession that would result in the significant drop in home prices. Today’s housing has an extremely strong foundation with years of tight lending qualifications, large down payments, fixed mortgages, plenty of nested equity, and limited cash-out refinances. This is a result of the subprime loans made in the early 2000’s that burst the housing market, resulting in a Recession.
My advice:
- If you are thinking about selling your home to take advantage of its increased equity, list your home now!
- If you are a Buyer, more housing inventory is coming—and borrowing money is still very inexpensive. This will create more opportunities for you to buy your dream home!
What are your thoughts on today’s Real Estate Market?