The Market is Shifting....Now What?
What the heck is a market shift in real estate? And what do we do about it?
Hi, my name is Kevin Yoder with Yoder Real Estate. Today, I’m going to talk to you about something that is front and center. It’s in the news. It’s local. It’s national. It’s even potentially global. This shifting that’s happening in real estate. What is a market shift? And what do we do about it?
A Look in the Review Mirror
Well, first, let’s go back in time just a minute. And now, many people don’t have hindsight. They have, what I like to say is the windshield, but the rear view mirror is helpful because when you look in the rear view mirror, going back to say, oh, I don’t know, 15 years ago or so, right around 2006 in some markets, it was a little bit different, but 2006, the market came to a peak in values.
And then, until 2012, they plummeted down the other side. Hindsight should indeed be 2020, but we have been in a sellers’ market now since about 2012 when it hit the bottom and going back up. So that means 10 years of a market improving condition, which means values have gone up for the last 10 years. And in the last two years or so, we’ve seen what we call an extreme sellers’ market.
Let’s look at it this way. I’m going to give you some definitions today that you can take and understand where we are and where we’ve been, but where we’re going to go. It’s all defined by inventory levels. So let’s talk about how to talk about the market. If we talk about the market being good or bad, if we’re not actually being accurate because it’s not that way, is it a good market?
Is a Sellers’ Market Good or Bad?
Someone says, oh, Kevin, I hear the market’s doing great. Well, is it? I respond with it just is. What I can share is that if people say, in terms of how many agents are selling homes and all that stuff, some agents are simply outperforming others in the category of home sales despite market conditions. And so, while one agent might be doing extremely well in a sellers’ market, many more might be challenged because it’s harder to get listings.
So the market’s defined by inventory levels. One side of the party — either the buyer or the seller — is going to feel like it’s a bad market. We’ve been in this place now for the last two years, even three, but really the last, I would say 18 months has been an extreme sellers’ market, which means there have been clearly less than six months of inventory, but we’re talking about less than 30 days of inventory. That makes an extreme sellers’ market.
Now for buyers. That’s where a buyer might say this market is terrible, is because it’s hard to find a home. There’s a lack of inventory, and there’s bidding wars galore. You guys have heard all the stories on that. So, now what’s happened?
The Pendulum is Shifting
We’ve been in a sellers’ market for 10 years, and the market has the pendulum swung way over here. And then it hung there. And now it’s starting to come back the other way. So, believe it or not, talking to thousands of people a year that are looking to make a move maybe now or later, maybe some that have been on the sidelines. This is the exact type of market that many people have been waiting for. They just don’t realize it.
Buyers Couldn’t Find the Right House, Sellers Hesitant to Sell
I often share that most of the mistakes that are made is based on a misunderstanding. And I uncover hundreds of misunderstandings every month. But in this case, there’s a lot of misunderstanding. Think about it this way. Go back to last summer. How many buyers were crying about not getting into their dream home? How many buyers had to sit on the sidelines because they would go out, put an offer in 30, 40, 50 offers, and couldn’t get the house, right? And so, now, it’s a little more freedom and flexibility to move around because yes, there’s longer days on the market and sellers are starting to worry about that. But remember, you might be the same seller that last year was hesitant to list your home because there weren’t as many homes on the market to buy.
So you stayed put. You wanted to move, but you just felt like there weren’t any options. Pretty true. There weren’t that many options.
Shifting Means Longer Days on the Market, More Inventory
But now, given there’s going to be longer days on the market, there’s less demand, there’s going to be more homes to choose from. Now, let me just insert something here seasonally. If you’re a seller that’s been looking at all the listings available for the last four months. November, December, January, February, let’s actually move this thing up to about maybe December through May. That snapshot, think about the lowest inventory levels that are going to be available for you to buy. They’re pretty non-existent.
Now, most people will list a home in summertime when kids are out of school. So, if you’re a seller that’s been on the sidelines waiting or afraid rather to list because there’s no other homes available, that’s because this seasonally, it’s the lowest time of year for inventory.
So now, as we’re gliding into the summertime, there’s going to be more homes available, and because the market has shifted, everybody can move around slightly easier.
Interest Rates Rising but Crazy Bidding Wars Decreasing
The other piece of this equation is interest rates. Interest rates. But remember, because interest rates have gone up, this is a payment conversation. So, just be aware of what that looks like. Last year, if you had to overbid on a property by 40, 50, $60,000, and most buyers were, that impacted the payment far more than a 2% increase in rate. So that’s something that’s often missed when we’re talking about I’m never going to pay. I can’t afford a home because the interest rates are higher. Yeah. But last year in order to get a home, which by the way, is the goal right, is to live in a home. You had to overbid on that and sometimes paying over what the market value was, and using appraisal guarantees and all those crazy tactics to get a house.
A More Balanced Market
Let me just bring this thing in for landing. The market is simply shifting or it’s correcting in a very natural way. What we were experiencing was unnatural. It was non-sustainable and every market shifts. Now, I’ve been in real estate for 20 years as of last Friday. It was my 20th year in the business. So now I’ve seen three distinct and many types of markets, but real three distinct types of markets. Sellers market moved into a buyer’s market, and then moving through. And right now, what we’re actually experiencing is more of working towards a balance market, which is a place where both buyers and sellers can navigate more freely and sellers can know that they could sell and get into that next place because there’ll be more homes available.
And buyers, of course, they’re going to have more options, right? And they’re not going to be caught in bidding wars. So, a good place to be. It’s actually a really sweet spot in the market.
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