The headlines can sometimes be alarming: “Home sales activity at a decade low.” “Prices are collapsing.” “The market is set to crash.” The attention-grabbing headlines can be disorientating to consumers who are reading that the market is in crisis, but who are finding very competitive conditions when they are actually out looking for a home. Now, perhaps more than ever, it is essential for real estate professionals to be the source for insights on local market conditions, to help dispel myths in the market, and to help buyers and sellers make the best decisions for them.
We have all read the stories and seen the data. Macro-level statistics paint a picture of a sluggish housing market:
- Slow sales. In most markets, home sales activity is not only below where it was a year ago, it is also trailing behind 2018 and 2019 levels. There are different reasons why there are fewer buyers in the market. Some buyers moved up their home purchase to take advantage of rock-bottom mortgage rates in 2021. For others, elevated mortgage rates and high home prices have caused them to sit out the market. Still others are frustrated by a lack of inventory.
- Prices softening. Home prices are down from their peak levels, and in some markets are posting modest year-over-year declines. Sellers cannot price their homes as aggressively as they did a year or two ago, as buyers have become more price sensitive.
- Rates high. Mortgage rates have settled into a new normal, which is double what they were during the height of the pandemic. Higher rates have eroded buyers’ purchasing power. This spring, the typical monthly payment is nearly $800 more than it was at the beginning of last year.
However, if you talk to homebuyers and their agents, the market feels much more competitive than these high-level metrics suggest.
- Supply constrained. Inventory has increased, but the number of available listings is still less than half the level of 2019. New listing activity is at a two-decade low, as many homeowners are staying put to hold on to sub-3% mortgage rates. Actual inventory levels may overstate buyers’ options, as some listings are overpriced or in poor condition.
- Seller’s market. Sellers are still in control, with multiple offers and offers over list price still common. A recent survey of Bright MLS’ subscribers found that sellers in the Mid-Atlantic received an average of 3.4 offers on homes sold in March 2023.
- Quick transactions. While the level of urgency has lessened, buyers still need to be prepared to make an offer quickly when they find a home they love. The median days on market has dropped since the beginning of the year. It is taking only slightly longer for the typical home to sell than it did during the frenzied pandemic market.
In psychology, cognitive dissonance refers to the mental toll associated with receiving contradictory information. Prospective buyers read the headlines about the housing market and get one message, but are finding a very different situation when they are out shopping for a home.
For more information, visit https://www.brightmls.com.
