We are well into the last half of the year already and it has been very different from the first half. What a difference a few percentage points in interest makes! Do you wonder what this all means as a buyer or a seller?
There are many interesting things at play that have affected the shift that we are seeing. For one, interest rates! In response to the record rates of inflation, the rates have been increased to combat the buying frenzy that we have seen in the economy and made prices rise at an unsustainable pace. As a result, many buyers are priced out of the market and no longer qualify at the prices that homes have risen to. But there is good news for some buyers who can still qualify for a home; they will see less competition, potential price reductions, and perhaps even have more negotiating power in some markets. Yes, rates are higher, but historically speaking, rates are still low! One thing many can keep in mind is that interest rates will go up and they will go down, so if you want to be a homeowner and you find a home you love, you can still purchase a home with the thought that if interest rates go down again, you can always refinance into a lower rate at some point in the future. Some people put it this way ..."Date the rate, but Marry the home".
As a buyer, many are concerned that the slower growth in appreciation means that the market is "crashing", meaning that it is a bad investment to purchase a home. Well, that all depends on what your goals are as a buyer. Questions you have to ask yourself are: Do I plan to live in this home for at least a few years? Do you understand that slower growth in appreciation is very different than depreciation - something that has only historically happened twice? Did you know that the forecast for appreciation is still an average of five percent per year? For example, if someone bought a $400,000 home and put down 10% down, 5% appreciation means they would gain $20,000 in appreciation over the next year and earn a 50% return on their investment due to leverage.
What about sellers? For sellers, there is also good news, and that is the continued low inventory still supports the higher prices that home values have risen to, but with the caveat that some homes may take longer and may sell for less than they did a year ago. Rather than a "crash" in home prices, sellers can expect a softening of the demand for homes, which makes it absolutely critical for sellers to prepare their homes for listing and market as best as they can. Remember, a list price is a marketing tool! You want to prep your home to the very best of your ability, which includes staging, photography, and other tools to make your potential buyers become emotionally attached! The biggest mistakes we see sellers make are getting stuck on listing a house at too high a price that repels activity, discourages buyers from making offers, and not making the investment in presenting their homes to appeal to as many buyers as possible - staging! Don't compare yourselves to your neighbors and you have to understand and adjust your expectations to what the current market conditions are now.
In a nutshell, things are actually coming back down to earth, and normalizing from the ultra-intense (and unsustainable) market that we have seen in the last two years. Our team at The Girl and The Home are advocates for you and we can't wait to work with you!