How is the Real Estate Market Changing and What Does it Mean for You?
Typically, the first written blog post of the month is reserved for an area market update. However, I already did a video update on Monday for Chehalis, WA and Centralia, WA. You can find that here. Rather than giving the same info for the other surrounding towns, it is probably wise to do a deep dive into what we’re actually seeing. Knowledge is power, right? In this case, knowing how the real estate market is changing could save you thousands of dollars in your real estate transaction.
How are Prices Changing?
There’s no doubt about it, prices are now trending downward. However, the general view on the street is skewed by lack of context. Take a look at the chart below. The first thing you’ll notice is that the average price in Lewis County goes up and down almost on a monthly basis. The next thing you’ll notice, is that even when it feels like the sky is falling down, the drop is not the largest one we’ve seen nor is it even the lowest price this year! Granted, since June, the highest price in recorded history, the market has gone down for three consecutive months. Essentially, the current trend has made it where we lost all the gains that came this year, but we’re still higher than most of 2021.
When people talk about a crash, they think it’s going to be exactly like 2007-2008 all over again. However, it order for the market to “go back to normal” we’d need to see about a 48% decrease in prices. It’s worth noting that this current downward trend is a direct result of increasing interest rates, not oversupply and consumer trust breaches. The current drop is equivalent to what we’d expect heading into the winter months as we lose about a third of buyers and half of sellers. I get numerous buyer leads every single day and homes that are priced to reflect the current market are selling. Clearly, demand is still there.
How is Inventory Changing?
Inventory was climbing quite a bit this year. I imagine sellers saw the signs of a changing market and other factors of buyers dropping out of the market lead to an increase of homes. As mentioned previously, we are typically seeing a reduction in inventory levels through the winter between 47%-67%. Taking a look at the chart below, you’ll see new homes on the market increased to 2017 levels. You’ll also see the inventory levels changing downward for the winter months. All of that said, taking a look at the peak of homes for 2022, we’re still 600 residential units below peak levels in 2010 and about 500 units shy of levels in 2007/2008. This is one of the major reasons why I believe the market will stabilize and not crash, and prices will level off much higher than anyone would trust!
How are Interest Rates Changing?
At the beginning of the year, interest rates were sitting at 3.25%. Today, after intentionally being increased four times, it’s now more than double at 6.75%. Economists project a peak of around 8% before the end of the year. However, nobody believes it will stay there for long. We could see rates back in the 5% range before long and most experts are projecting a settling down of rates somewhere between 4-6% by next year. One of the reasons the market was allowed to flourish was because we saw rates below 4% for much of the past 4 years. We may never see those types of rates again!
How are Offers Changing?
For much of the past couple of years we were experiencing a heavy seller’s market. This meant buyer’s were waiving inspections, buying homes “as-is”, and paying way over asking price just to name a few. While we are still in a seller’s market inventory wise, seller’s are reeling and trying to catch up to what the market is doing. This is a golden opportunity for buyers to once again get their closing costs paid. Another option is to have the seller pay down your interest rate! We are starting to see buyers doing inspections and they get to keep their first born child while paying asking price or even a little less!
How does the Changing Real Estate Market Affect You?
So what does all of this mean for you? It depends on whether you’re a buyer or a seller. For homes that are having trouble selling, we are seeing a 7-15% reduction in price. If your agent is using comparable listings from six months ago to price your home, they will be way off on price. When you are priced correctly, your home may still take 2-3 weeks to sell. However, we are starting to see listing expire from the market because they were caught in the shift.
If you’re a buyer, you have way less competition than you did just a few months ago. Even though inventory will drop a bit during the winter, housing options are up overall this year. Even lenders are catching up to the market and providing lucrative lending options to offset higher interest rates. No matter what, home ownership is always an excellent financial investment for the simple fact that you’re paying your own mortgage rather than your landlord’s. Don’t sit it out and wait! The real estate market is changing. Gather information and make a plan because that’s the only way to move forward.
If you’re thinking of buying or selling your 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 | Napavine, WA | Onalaska, WA 98570 | Rochester, WA 98579 | Vader, WA 98593 | Winlock, WA 98596 | Boistfort, WA
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