The housing market has changed drastically in the last month or so, much to the chagrin of would-be home sellers, but happy news for home buyers. There are several interesting things to note as of late:
1. Inventory is rising. Last week alone inventory rose 3.25% – that’s in ONE week. Inventory is up 31% from the same time last year, creating a cooling off amongst buyers as sellers race to list homes before prices drop further.
2. Prices are dropping. Studies are showing that prices have peaked, and it may be some time before we see them as high as they were. Here in San Diego County we have been seeing large numbers of homes dropping prices weekly, and listing agents are communicating with selling agents again! My phone is filled with messages from agents after I show their listings – something that has been practically unheard of for the last year and a half or so. It is much tougher to be a listing agent at this time. In the last week and a half I have seen 6 homes in my client searches drop $100k or more – and that is just in the searches for a few clients.
3. Market time is on the rise. We won’t be seeing many homes list and sell in a weekend with multiple offers – agents are going to have to bring back strong marketing plans. Although some homes are still garnering multiple offers, most are not, which brings negotiation back into the picture, and a chance for buyers to finally get into homes without insane competition.
4. Interest rates have risen. This is of course a downside for buyers, but with the increased inventory, longer market times, price drops and less competition, the still historically low rates do not seem to be phasing most home buyers.
5. Relisted homes are back in force. Because homes are not selling quickly many agents let them expire and relist them as new listings with no market time in order to stimulate showings. This is something we have not seen in a long time. According to Altos Research, relisted homes are at their highest level in recent years, with numbers rising every week.
6. More homes are falling out of escrow. Another fact for the “new normal,” more homes are falling out of escrow. It could be due to cold feet or maybe buyers are realizing prices are dropping and they feel their offer was too high. Regardless, several escrow officers have told me they are seeing a lot of this, and I am seeing many homes come back on the market lately.
7. Foreclosures are coming. Fannie and Freddie and other lenders have finally started sending out notices to home owners who used forebearance to avoid paying their mortgages during COVID – hundreds of thousands of homeowners across the US used these programs to help due to job loss, illness and other COVID related issues. Many people may not be able to start paying their mortgages again due to changed circumstances, and this could create a foreclosure wave. Personally I do not think areas like San Diego County will be hit hard, but we will notice this in the market over the course of the next year or so.
The bottom line is that the real estate market has shifted to a buyer’s market for the first time in many years. It was a long run for sellers but now we will start to see negotiations take center stage again, with many homes selling for under list price. As we head into the Fall and Winter I think it will get even better for buyers and harder for sellers. We will also likely see a mass exodus of real estate agents from the market (just like after the crash in 2008-2010). It will be interesting to see what Spring 2023 brings for the housing market.