What’s Happening in Our Local Real Estate Market
As we’ve seen interest rates increase resulting in a drastic change in the real estate market since the beginning of the year, many have been asking me this very question. So, I pulled some data from South Snohomish County to see just what the numbers say and to offer my thoughts.
We have definitely seen a slowing in the market, and many are saying how homes are coming down in value. I’d agree that we have seen a slowing in the market, but will offer another thought on that homes are coming down in value. My opinion is that we saw so little inventory in the spring and so many offers on homes, that prices just went above where anyone imagined. With such low interest rates at that time, it was worth it for buyers to buy at those prices. I’ll touch more on this below! In the graph below, you can see the Active Listings per month (in red) compared to the number of sales (in green) and how the limited spring inventory reflected the record prices.
As mentioned above, the availability of homes for sale was and is not still meeting the demand of buyers. As interest rates have climbed, it has forced buyers to either bow out of the market and rent longer, change their home search criteria to a more affordable area, change the type of property they were searching for (single family home, townhome, condo) and reduce the price point in which they were searching. We also have more sellers offering their homes for sale, creating more options for buyers. Ultimately, buyer behaviors have changed and more homes have been offered for sale creating a slowing in the market.
The data below shows price per square foot and the increases both year over year and the monthly trend for 2022.
To address the comment above on home prices falling, what we have seen is an inflated home sale price model from the spring that resulted in comparable data for new home sales give both sellers and real estate professionals a high bar for pricing new home sales. For example, let’s say your neighbor has the exact same home design and upgrades you have. Here’s the scenario:
Your neighbor listed their home in February for $750,000 and sold the home for $950,000 in March after receiving 15 offers. Buyers were eager, plentiful, and agressive understanding that they have to make higher offers to have their offer accepted on the home.
You then list your home in May for $950,000 based on your neighbors sale. Although many buyers may be interested in the home, they are not eager to aggressively offer based on higher interest rates (their payment will be much higher than the neighbor, making the home less affordable). Buyers also hold back as they don’t want to pay more and worry about multiple offers. Your home listed at $950,000 then receives no offers and you have to begin reducing price.
In this scenario, the home was overpriced based on current market conditions. If the home was listed somewhere between the $750,000 and the $950,000 range, it may have generated more activity and offers. Since this has been happening, it’s showing that home prices are falling when really what’s happening is we have seen too many over priced properties. Many homes that are priced based on current conditions have been getting sold quickly still, and in some cases with multiple offers still.
It is still a great time to both sell and buy. Sellers are still getting great prices for their homes and buyers are having a better chance of getting offers accepted while having more inventory choices. Smart buyers understand that although interest rates are higher now, they are still affordable and can refinance should rates lower in the future. If you, or someone you know, is interested in chatting about my strategies for both buying and selling in today’s market, let’s chat!