February 2023 Market Update
1. This is not 2008.
I’ve seen a lot of comparisons between the 2008 market and now. This market and the dynamics at play are different. The biggest distinction is we have not had a flood of homes hitting the market as we did in 2008. The factors that led to the real estate market crash are not present now. Those were lax lending requirements, low equity levels, an oversupply of homes available, and a stream of foreclosures. In contrast, today, we do not have oversupply, equity levels are the highest ever recorded, and we have healthy lending requirements. We are dealing with inflation and higher interest rates. An interesting effect of higher interest rates is they keep people in their current homes and prevent a surge of homes for sale on the market.
2. Interest rates drive demand.
We saw demand decrease quickly in response to higher interest rates (as the Fed intended). The real estate market shifted in June ’22 and slowed from there. In addition, prices peaked in the spring of ’22 and have softened. Moving forward, the real estate market will continue to be impacted by rates which makes market predictions difficult. If they stay steady or decline, we should see a stable real estate market moving forward with decent activity. If rates increase or continue to be unstable, this will slow demand.
3. Things are selling, but different than before.
Pricing for sellers is key. If you price your home too high, it will sit on the market. This is the time to price where homes are selling and take the time/effort to ensure your home shows well when it hits the market. There is still demand for homes, but buyers are pickier and have options to choose from. We see examples of uncertainty in the market affecting buyer confidence; one example of this is a higher rate of buyers terminating contracts during their option/inspection period.
4. Should you buy now or wait for lower prices? It depends.
If you want to know what prices will do, we have to look at supply, as it differs depending on what you are buying/selling. If you are buying a home on acreage, we still have limited inventory available. As of today, it’s 10 homes on 1-2 acres , west side of Georgetown, under $1 million. If you are looking for new construction in a master-planned community, we have 367 homes available under $1 million. If you want acreage, I do not expect a “crash” or a huge difference in pricing due to lack of supply. It is possible we could see some more downward movement on pricing in new construction or homes in subdivisions where they are still building. We saw this same trend during the great recession, with properties on acreage holding values while new construction declined at a faster rate, all due to available supply. Other market segments that will affect supply and pricing: are the area/town you are in and price point. It is best to discuss your personal situation with a real estate expert of your choosing. I recommend one active and experienced in this market as well as slower real estate markets (like one working in the 2008-2012 real estate market).
Explanation of Months Inventory Used in Video: Months of inventory calculate the supply of homes available with current demand. 3 months of inventory means if no new homes hit the market, coupled with existing demand, we would run out of homes to sell in 3 months. At the height of the real estate market "covid boom," we had an average of 1-2 weeks of inventory. In June of 2009, we had 7.33 months.
If we can help answer any of your questions, please feel free to call or message us here at Currey Real Estate.
Lindsay Currey
Broker/Owner
Currey Real Estate