Back in January the real estate market was scorching hot, demand was high, inventory, along with interest rates, were very low, and the typical slow season was anything but slow. The previous year, 2021, was perhaps the busiest year in real estate in about a decade and a half as people were wanting their own space coming out of COVID and taking advantage of the low interest rate environment. Competition was fierce for those submitting offers and sellers were able to pick from several offers above asking, and often with buyers removing or reducing contingencies. How long would this real estate "rush" last?
As the winter gave way to spring, the FED announced that it would begin increasing interest rates and this put a shock wave through the industry. Some people rushed to get their offer accepted to take advantage of the fleeting low rates, while others began to take a more pessimistic approach, and all of a sudden it seemed like there was lots of talk about "bubbles" and that the housing market was going to crash. Summer came and went. It was not nearly as busy as the last couple seasons. Was this just a reaction to the increased rates or something more? On one hand a red hot real estate market, with soaring prices and extreme competition, is not sustainable long-term. On the other hand, it felt like when you are cruising down the highway at 55 miles per hour and all of a sudden you enter a construction zone with a 25-mile-per-hour limit and it feels like you are going much, much slower, relatively speaking.
The typical busy season of spring and summer was slower than the last few, and multiple offers became less the norm, and in fact price reductions were happening all over the place. These reductions tended to be those trying to reach with their pricing, and not factoring the changing real estate environment. Inventory began to increase as well, from around 0.5 months to 2-3 months' supply (six months of supply is considered a "balanced" or "normal" market). So, while we remained in a sellers' market, there was a lot more competition amongst those selling, especially with decreased demand due to the increase in mortgage rates. Prior to COVID it was very normal for a property to be on the market for 60 to 100 days, but coming out of the last couple of years, a few weeks seemed like an eternity on the market.
Through the fall the market remained timid, and what I mean by that is that many sellers were watching price reductions happening, and unsure of where the market was heading. Buyers were being stretched thin with the increased rates, and home prices remaining comparably high. Many potential buyers were and are unsure of where rates are headed, as well as how much will prices come down? Now through the beginning of winter (thus far) we have seen that homes that are priced well are still moving quickly. The data show this; looking at the Beacon Report we can see that the average days on market for "sold" properties the last three months has been 20 (September), 28 (October), and 18 (November) days. That is a good sign for the market: homes that are priced well, moving quickly, but not at hyper speed like the last couple of years. Buyers and sellers are negotiating in such a way that both parties can get some sort of favorable terms. If you are curious at all about predictions for 2023, please feel free to check out my article from a few weeks ago!