Real Estate brokers are frequently asked, “How is the market? What do you think it will do?” Of course none of us have a crystal ball, but some of us who have been around for awhile can probably offer an educated guess.
Historically, there have been down turns in the market about every 8-10 years, some of which have been very dramatic down cycles such as in 2007-2008. That cyclical ebb and flow is the hallmark of a capitalistic or free market society where there is a self correcting or cooling off period after every spike in market activity.
We are currently at the end of a two year period that has been a lull or flat real estate market. Instead of a detectable downswing in median sales price and sales, the statistics appear to have flat lined for the past 24 months. The number of closed sales and new listings now appear to be rising slightly, which hopefully foreshadows a move upward. Residential sales below $350,000 in the metropolitan area have been steady and even rising, while sales of rural homes and raw land continue to struggle.
Here are a few negative factors that I think combine to make things different than any other down cycle I’ve seen in the past three decades, 1) High interest rates, 2) High insurance rates as a result of wildfires, 3) Unusual lingering political angst because of tariff threats, 4) More prospective buyers renting or combining households instead of purchasing, 5) Historically low housing inventory, 6) High costs of building materials, labor and fuel, 7) Inflated listing prices discouraging new buyers.
Many sellers have opted not to put their property on the market even though they have a desire to move or upgrade because they don’t want to trade up into a mortgage with 7% interest rates compared to the 2-3% interest rate they currently pay. Many buyers are waiting impatiently for interest rates to drop but are becoming increasingly calloused to the thought of paying higher rates. Many buyers are adjusting their spending habits in order to stash away sums of money for a larger down payment.
Whenever he saw me crying or whining in pain, my grandpa used to say, “It will be okay when it stops hurting!” I suppose the same thing is true in real estate. We’ll either discover some way to be comforted or become more accustom to the current pain we are feeling and then it will be okay!