That’s the most frequently asked question in real estate, and the answer you get will depend upon whom you ask. You will get differing view points from the media, the government, the banks and real estate brokers.
The past three months have produced the most dramatic and sudden market shifts I have seen in the 17 years I’ve been selling real estate. My colleagues who’ve been around even longer (some of them, 30-40 years!) are saying the same thing.
What’s different? In early April, new listings were still flying off the shelf with multiple offers and sale prices well over listing. By the end of April, brokers and sellers began to notice that the number of offers was decreasing. This wasn’t totally unexpected — buyer fatigue sets in every year about that time and usually lasts a month or two. This year, however, although inventory increased in May and June, the buyers weren’t bouncing back. And those who did, felt freer to include contingencies in their offers, rather than waiving inspections and/or financing. That trend has continued and deepened in June and July. As a result, we shifted away from a solidly sellers’ market to a more balanced market. The Law of Supply and Demand always prevails.
Analysts have been struggling to keep up with these latest developments, applying increasingly-nuanced descriptors such as “change,” “shift,” “rebalance,” and “reset” to describe what’s happening in the market.
Whichever term you prefer, these things are certain. The market is not declining. Homes are not losing their value. Prices are not going down. It’s hard to convince the general public of that when they suddenly see price reductions where there were none before. The reason for the price reductions is that it takes sellers a while to catch up with what’s really going on in the market, especially when it’s not in their favor. In other words, the homeowners with homes currently on the market still have visions of what might have been if they had listed a few months ago. They are now “reducing” their list price to what it should have been in the first place.
Perhaps the biggest mystery is what CAUSED this historically swift shift?
Where did all the buyers go and what drove them away? We will probably need to wait for the benefit of hindsight to get a clear answer, but most likely, it is a combination of factors — a perfect storm, if you will — rising interest rates, rumors of a recession, increasing home prices, record-breaking inflation. All of these contribute to a general feeling of uncertainty and unease. Throw in the summer weather and who can blame buyers for taking a break? They’ll be back.