Shifting Gears In 2023
Shifting Gears In 2023. What a weird time to be in the real estate industry. Whether you consider yourself a specialist or you’ll take on any client, nobody seems to know if we’re heading into a buyers’ market or not. At the very least, the experts seem to loathe to take a guess.
In July of this year, Emily Peck at axios.com declared that “Homebuyers retake the upper hand.” By the end of October, the media appeared to be as confused as our clients when Robin Rothstein at forbes.com asked the now very popular question, “Will Prices Drop?”
The elephant in the room is inflation and, as a result, rising interest rates. Buyers are feeling the pain, evidenced by mortgage applications being “… at their lowest level in 22 years,” Rothstein says, citing the Mortgage Bankers Association (MBA).
There is a major gap between what buyers and sellers expect in 2023
A recent Zillow Group, Inc. survey of real estate agents finds that homebuyers are expecting prices to significantly drop. Zillow, however, says that won’t necessarily be the case: “Zillow research finds a rapid drop in prices is unlikely.”
Other prognosticators, however, have opposite opinions:
- The experts at Morgan Stanley say that “… home prices will fall 7 percent, from the peak of pricing in June 2022 to December 2023,” according to the New York Times.
- Moody’s Analytics extends its forecast into summer 2024, predicting a 10% drop during that time period. If we experience a recession, bump that percentage up 10 points.
- “Economists at Goldman Sachs expect home prices to decline by around 5% to 10% from the peak hit in June,” claims Anna Bahnay at cnn.com.
As you can see from this short sample of opinions, nobody knows what will happen with home prices in the new year. If you have a fence-sitting buyer, you may want to ask them if they’re willing to gamble that prices and/or mortgage rates will fall dramatically?
What if right now really is the best time to buy a home?
Sellers, on the other hand, seem to be living in la-la land, according to the Zillow agent survey. “… sellers continue to expect bidding wars, offers above asking price, and quick sales, despite the cooling market.”
In fact, 81% of agents surveyed say their selling clients expect multiple offers on their homes, while 79% say their clients swear their homes will sell for more than market value, with an equal share saying their clients expect a quick sale.
Most troubling is that 74% refuse to lower the price of the home. Which, by the way, flies in the face of reality. Nearly 30% of sellers have had to cut their home’s list price.
One can’t blame them for their delusion, really. There are so many distractions in the news, competing for our attention, that real estate news most likely takes a back seat. As an agent, our job is to educate consumers, so we blog it, we Tweet it, and post it on Facebook.
In fact, here’s a little tidbit from the survey that I want to share with unrealistic home sellers:
“Competitively priced listings are going under contract in 19 days nationwide, 10 days faster than before the pandemic, while other homes are lingering on the market a median of 54 days.”
My two bits. This comment means several things: One, you must be realistic about pricing your home otherwise it will just set way to long. Sellers in a declining market need to anticipate the market direction in pricing their home. Buyers will see the Days on the Market and assume that something is wrong with the home because it hasn’t sold. Two, while your waiting for that buyer, you may lose that one home you really want because another buyer was ready to make the deal.
