The Tides Are Turning
After two years of a frenzy-type market, it appears that buyers could be seeing a little relief from the multiple offer, record shattering craziness. Will it result in a crash? I don’t think so, but we are seeing buyers pulling back from the table in a ‘wait and see’ mode as interest rates creep closer to six percent. Inventory of homes is increasing, giving buyers more choices and sellers are having to be more concessionary when it comes to how they handle the process. For the first time in years, sellers are having to consider giving credits for issues that arise and are definitely needing to price their homes in a more thoughtful way using factual data instead of the ‘anything goes’ market that we experienced last year.
As all of this begins to unfold, it’s inevitable that prices will soften. I’ve been through four real estate cycles in my 30-year career and this one does not resemble the others. In the early ‘90’s, Sacramento was struggling in their job market. Military base closures were causing us to fear that our town hadn’t prepared well for what was happening. The market spiraled downward for six years. In the early 2000’s, we rebounded with a solid 20% yearly increase for five years in a row. Again, an unsustainable growth in prices. Then the mortgage meltdown hit us. We all know what happened then. Values dropped 40% over a two-year time frame. A majority of our homes for sale were being sold by the bank, or as a short-sale by sellers who found themselves under water. After a few years of the foreclosure market, we recovered. Then covid hit us. What we thought might have sent us into a spiral again put us into a real estate frenzy, as people looked for places to live that weren’t congested, but instead had space. Sacramento was a nice option. Our locals also started working from home so they found themselves needing a different space - one that could function as a home school for kids and a home office for the adults - all under one roof.
Fast forward – Now here we are two years later and things are changing again. Our economy is struggling. Gas prices are through the roof. Interest rates have gone from the high two’s to the high five’s in a matter of months. It’s too early to tell what the outcome of this market will be, but I do know this. For those with equity, and most sellers have a significant amount of equity right now, they’re deciding if they want to stay long-term or is it time to make a change – either to a home that fits their needs for the next decade, or is it time to move out of California altogether? For many, all this means is that you’ll ride the real estate wave and watch your property values shift. It really doesn’t matter if you love your home and you have a payment you can afford for years to come. But if not… if you’re thinking ‘yikes’, we’ve seen the top of the market and need to make a change before it heads down the other side – then I’m here for you!
My job is never boring! I actually prefer the market that we’re headed into because I like to look at the numbers and try to analyze what’s happening. When prices are climbing so fast and really for no reason, other than the fact that people are frantic to throw the money that they made on the sale of their home into their next home to outbid the other buyers, that market isn’t sustainable. But that’s what we just came through. However, if you bought over the past two years, you have the benefit of a record low interest rate. You may have paid more for your home, but your payment is nowhere near what it would be if your rate on your loan was in the 5-6% range, so it all typically balances out.
I don’t have a crystal ball, but I am going to start doing “Coffee with Carol” soon. A daily podcast on which I’ll be looking at homes new to the market, what homes sold the day before and answering any questions that people have about real estate. I hope you’ll pop in once in a while to join me.
In markets like these, experience matters! I love my job and enjoy helping people with all of their real estate needs. If I can be of service to you or someone you know, I look forward to hearing from you.
In the meantime… watch for "Coffee with Carol”.
