Summer Market Update: Overheated Markets Cooling Down
Markets do not like transition periods, and the current shift is no exception. After almost two and a half years of an unprecedentedly tight and competitive housing market, rising interest rates and inflation may be causing buyers to pump the brakes. Lenders are reporting the lowest numbers of new loan applications in 22 years and new contract activity in Fairfax, Arlington, Montgomery County and D.C. in the first two weeks of June was down to a 6 year low. Interest rates are up, affordability is down … here’s how to prepare for a shifting summer market.
For Sellers - Price for the market you’re In, not the market you want.
Buyers may move more slowly to make purchasing decisions as their dollar doesn’t get them as far, meaning fewer offers overall, longer days on market for sellers, and an opening for more negotiable terms and contingencies in sales contracts. Buyers may replace their competitive desire to write the winning offer with the fear of potentially buying into a fragile housing market. The houses in our area that “check all the boxes” (desirable location, well-maintained, properly presented) will always have demand and will continue to get competitive offers, but it is the houses that have challenges that nervous buyers will be likely to stay away from. A seller’s ability to respond to market feedback and pivot strategy in a changing market is critical and will determine their level of success.
For Buyers - low housing inventory and high prices are sticking around.
Inventory remains low and upward pressure remains on home prices even as buyer affordability decreases. The pent-up demand of the last two and a half years of record low inventory, record sales prices and record low rates will be able to absorb short-term dips in market activity. Fewer existing homes were available for sale in January 2022 than at any point since the late 1990s. Just 850,000 homes were on the market at the start of the year, down 17.5 percent from January 2021, which was itself at a record low (source: Joint Center for Housing Studies of Harvard University). Even with reduced overall contract activity, savvy buyers will be competing for the same in-demand properties and can expect to continue to make strong, competitive offers to get under contract.
Don’t let the house dictate your life, let your life dictate your house. Life happens whether the market is up or down, our housing needs won’t wait for the Fed to lower interest rates or supply-chain shortages to resolve themselves. Now, more than ever, it is important that you work with a trusted professional who understands the landscape and helps you navigate the process. If you're thinking about buying or selling, call us for a private consultation so we can discuss how we achieve exceptional results for our clients, regardless of market conditions.
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