Purchasing Real Estate in Today’s Crazy Market
So you’ve had “the talk” with your significant other. You are considering buying a home but feel like the market is a bit too unstable. You’ve seen all the headlines of falling markets and the mega home sites are littered with ‘price reduced’ or ‘price improved’. Should you wait for the market to crash or follow the advice of real estate experts who say it’s a great time to buy? It can literally paralyze your decision with so much bad news and who can you trust nowadays anyway? Well, you know me. Devoid of any emotional capabilities, I always look to the stats for my answers because the numbers never lie! Combined with the stats, I’ll share with you my own personal experiences in the real estate ecosystem.
Home Prices and Offers when Buying a Home
Everyone who is waiting for the market to crash is not paying attention to the numbers. Inventory is up, but still down overall (we’ll go over this more below), interest rates are up but still down overall (we’ll cover this too), and although we are seeing a ton of price reductions, the average sales price is continuing to climb. So how do we reconcile what we’re seeing on the streets with what the numbers are actually showing us?
Well, the reality is we went from a strong seller’s market at near 100% or more absorption rate to about a 20% absorption rate. The absorption rate is how fast new homes coming on the market go off the market in a month’s time. Anything above 15% is considered a seller’s market. So, we’ve shifted from an abnormally strong seller’s market to a standard seller’s market. This is a drastic difference and that is what you are seeing/feeling/hearing, but we’re not seeing a crash or even a correction in home prices.
However, sellers are still reeling, just like buyers, from these changes. If their homes do not sell in a week or two, they start to worry. In a balanced market, homes take about 5 months sell so context is king. For sellers who do not have this context, buyers are able to get their closing costs paid and repairs made to the home. Homes are also selling for between 97% – 98% on average of Original List Price. This was not possible just a short year ago.
Supply and Demand and Inventory
There are more homes for sale right now than there was in all of 2021 and 2020. That said, the last time inventory was at these levels was in 2005. The county’s population has increased about 11% since 2010, while our inventory levels have decreased 63%. Therein lies the issue. Demand has increased and supply has dwindled. Thankfully, it is starting to rise, but it needs to be about 3x it’s current amount before we see it catch up with demand.
Is It a Good Time to be Buying a Home
Admittedly, I am baffled by buyers’ actions sometimes. This is one of the greatest times to be a buyer. Sellers are still reeling from ‘missing the boat’, yet buyers are not taking advantage on the whole. The 30 year fixed rate mortgage is currently sitting at 5.625%. While this is a whopping 2%+ higher than earlier this year, it is STILL historically low. This is where interest rates were at in 2010 when I purchased my first house.
Another great benefit to buyers is they can negotiate with sellers to buy down their interest rate. Check with your lender the maximum amount that you can buy down, but also know sometimes there are limits based on how much you put down on a down payment. However, a 2% buy down will get you back to that mid 3% range. With tons of buyers leaving the market in droves, this is your opportunity to strike as there is way less competition than earlier this year.
Look, prices are not going down in the foreseeable future. The longer you wait to start the process of buying a home the higher they will go and the less house you’ll be able to afford. Let’s play a game. Say the market does crash, exactly like it did in 2007/2008, prices are so inflated to a new normal that a 25% drop will place the market back to mid-2021 prices. If you didn’t jump then, what makes you think it would be a good time to jump at that point? Waiting is not a strategy, its fear disguised as prudence. Take a look at the actual numbers and make a knowledge based decision. That’s what I’m here for!
The Shifting Market in a Nutshell
Many people believe that the market is crashing, but that is not the case. Further, the stats simply don’t support that idea, not even close! Inventory and interest rates may be up, but so are prices believe it or not. It is still a seller’s market and appears to be staying that way for the foreseeable future because of supply and demand. However, there is less competition and buyers are able to retain their contingencies and some concessions from sellers. The market has changed. It appears to be more of what we’re used to from before the pandemic. It’s more important than ever to hire a real estate broker who has the experience and expertise to guide you through an ever changing real estate market.
If you’re thinking of buying a home in the west Lewis County area, contact me today! I’d love to hear from you! Eren Millam – Managing Broker Premiere Property Group, LLC WA License No. 26933
Chehalis, WA 98532 | Centralia, WA 98531 | Adna, WA 98522 | Boistfort, WA 98538 | Napavine, WA 98565 | Onalaska, WA 98570 | Rochester, WA 98579 | Toledo, WA 98591 | Vader, WA 98593 | Winlock, WA 98596
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