Newsletter Date: September 28, 2023
There have always been ups and downs in the real estate market. But this past year-and-a-half has brought us a special set of challenges that have had a big impact (psychologically at least!) on both buyers and sellers. Here are some of the most notable issues I see that people are facing in today’s market:
Few houses for sale
The single defining characteristic of this market is that right now is that there aren’t enough homes for sale. Household formation is strong at this point in the demographic cycle, but the supply hasn’t kept up. Lots of people want to buy, so prices have recently gone up (a bit) because inventory remains low. Because of this, it’s getting harder and harder to find a good, affordable property you’d actually want to live in.
As I already said, the lack of inventory has worked to keep prices high. Bidding wars happen a lot between buyers, which is keeping prices high. This can be disheartening for people who are trying to buy a home for the first time or who are on a tight budget. Increasingly, only the most-qualified, highest-income buyers are able to compete in this market (which is actually good for sellers)
It’s harder to get a mortgage now that loan standards are stricter. Lenders are looking more closely at the credit scores and financial histories of people who want to borrow money. Even more than that, the steep rise in rates has crushed affordability, discouraging many would-be homeowners from even applying for a loan.
Uncertainty about the Economy
The real estate market is affected by the current uncertainty in the economy. Layoffs at numerous Bay Area tech firms have affected many thousands of households. This economic landscape has caused some people who want to sell their homes to put them on the market later than they originally planned, which has made the lack of homes even worse.
Even though the market turbulence is considerable, it’s important to keep in mind that the real estate market is always changing, and what’s going on now is just a passing phase. In the meantime, though, buyers and sellers can use the following tactics to get around these problems:
1. Buyers should be ready and have their money figured out before they start looking. This may mean asking family for gift funds, tapping retirement savings, paying points, and even getting an interest-only mortgage to bring the payment down to a reasonable level.
2. Would-be homeowners might also need to be flexible and look at a wide variety of neighborhoods or kinds of homes that could fit their needs. In a competitive market (in any market, really) finding the “perfect” home rarely happens.
3. In this choppy, hit-or-miss market, sellers are well advised to focus on a pricing strategy, rather than a specific price, that will get them what they want: the highest price the market will bear at the time they go to sell. Selling your home for way over list price (even $1 million over list!) is possible, even in this topsy-turvy market.
There is rarely, if ever, a “perfect” time to buy or sell. Any decision to buy or sell a home carries risk, and it is impossible to time the market with any degree of certainty. When it’s time to sell – sell. If you need a home and plan to live in the area for some years to come – remember that the best time to buy a home is always twenty years ago…and today.