Changing Real Estate Climate

This spring of 2023, while we see our current forecast changing – snow melting, April showers, and rising temps, we are looking forward to a rising real estate forecast as well!  The first quarter of 2023 saw a significant decline in pre-existing home sales compared to the same time in 2022.  A decline anywhere between 20-40%!  That is a drastic decline.  What has lead to this change? One of many reasons and the biggest factor is the rise in interest rates.

While your initial reaction might be to assume that there are less buyers in the marketplace due to increased interest rates, the fact of the matter is there are plenty of buyers still in the market for a new home, however there is not enough inventory to meet demand.

Lenders have developed programs available for buyers that help ease the burden of unplanned interest rate increases.  At the end of the day, there will always be buyers who need to buy.  Newly married couples, college graduates, downsizing, job relocation, divorce etc.    While interest rates are a factor, if you have to buy sometimes, you just have to buy.

The biggest impact that the increased interest rate has had are actually on sellers.  Homeowners have benefited from low interest rates for the past 10 years.  Those with the ability not only purchased homes but re-financed homes locking in those historically low rates.  Therefore homeowners who do not fall into the above mentioned categories of needing to move, have no motivation to move just to find a larger home, nicer home or upgrade.  Homeowners aren’t motivated to sell their home because they could be giving up their 3% interest rates for 7%!  Rather than moving into an upgraded home which might have originally been their plan, they are spending money improving their current home and therefore there are less homes  than needed available for sale.

As has been the case the last few years, there are still sellers getting top dollar for their home with multiple offers due to the lack of supply.  However over-ambitious sellers still may be doing price reductions because the buyers interested in their home aren’t eager to “over-pay” as they perceive it because of the higher interest rates they see now compared to what thy saw last year when they began their home search.

To sum it up this spring, it’s a great time to sell if you are willing to take the leap into the buying pool!  And you will need a knowledgeable agent to help guide you through the process!