What’s next… preparing for the ‘Fall’ of the market

Lisa Shaw, Re/Max Executive Realty – We’ve all seen it before, well maybe not all of us, but most of us have. History repeats itself and naturally the real estate market isn’t immune to that. The last peak we saw was in 2005, and many of us thought we would never see the prices that high again. Shortly thereafter in 2009 when the market crashed, it was a disaster.

Short sales and foreclosures were the primary inventory and many homeowners were forced to walk away from their homes that they had put little to no money down on. Banks were upside down and the government had to bail them out.

It was a very sad time for many Americans who lost their American Dream. The real estate market took several years to recuperate from that fall but it finally did recover and in the last 10 years the home prices have steadily risen and eventually, about 3 years ago, gone completely crazy. The culprit of this you ask, many things, mainly though, extremely low interest rates and then, yes, I have to say it, COVID and the need for more home space peaked the market to a new extreme.

When do economists and real estate professionals expect this will change? There’s no way to predict this. However, as rates begin to tiptoe upward, more and more prices will have to adjust. The most frustrating part, and something to really pay attention to, is that the only way we’ll ever know for sure when the prices are adjusting/falling is when they’ve already begun to decline.

There’s an upside to this anticipated decline in home prices though…first and foremost, once interest rates adjust and cause home pricing to adjust, it then becomes more of a balanced market and can be economically hearty for both buyers and sellers as opposed to a very one-sided sellers’ market that we have been in for the last few years.

Secondly, the prices are not expected to decline drastically and, even more importantly, banks are in a very good position today, far different from where they were in 2009 when we had a major crash.

What does this mean to us all? It means that the real estate market will self correct itself and become more balanced. We can’t sustain the increases we have been seeing for the last several years in median home prices so this will help adjust that. Home prices will level out and hopefully decline slightly as the interest rates increase.

In a balanced market I believe interest rates will likely need to be in the 5.5%-7% range so that home prices are more reasonable and more buyers can afford to buy. It doesn’t end there, though. One of the most discouraging aspects of the market is the competition buyers face when placing offers. Most listings go on deposit within the first week of being listed and offers are so competitive that it has forced buyers to waive home inspections and cover appraisal deficits, causing even more stress in the home-buying process than usual. Sellers too are up against a major issue. If a homeowner wants to sell, whether it’s to downsize, upgrade or relocate, it’s almost impossible to get an offer accepted when you have to add in a home sale contingency to your offer!

So hopefully we’re headed for a balanced real estate market where both buyers and sellers will be in less vulnerable situations. This may take several months but many real estate professionals believe we are heading in this direction in the next year, thankfully!

Feel free to reach out for more tips on hiring a professional Realtor that fits your style or anything else real estate related, Lisa Shaw, Re/Max Executive Realty, [email protected] 508 826-7661.