January 1st, 2018. The new year began, and buyers came out hot. The cyclical “lull” of the holidays seemed to evaporate overnight, and the market went nuts. This is atypical. We usually see a slow uptick in activity as the market gradually eases into Spring season. However, not this year. January greeted us with multiple offers, bidding wars and record high sales prices right off the bat.
So what happened?
Our highly competitive market has been very advantageous to Sellers due to low inventory and lots of buyers. Scarcity has made homes for sale more valuable. And so buyers have to give up a lot to win. Rising prices and rising rates have caused the same house to be slightly more expensive six months later. While sellers are trying to recoup what they lost during the Great Recession, buyers are trying not to make the same mistake. I suspect there was a fair amount of “coming to terms” with the reality of our real estate market this past December. Buyers realized that if they want to buy, now is the time.
And so, on January 1st, a flood of motivated buyers hit the market. Our low-inventory problem grew worse because it always takes Sellers a few weeks or even months to get on the market come the first of the year. Buyers definitely outnumbered Sellers. So, during the first quarter, our market went from bananas to bonkers. It was hectic.
And then, suddenly, in April, there was a shift. A cooling. It appeared that the market might be changing. It could be a “lull,” but it could also be that rising prices and rising rates have caused buyers to finally say “enough is enough”. We knew that rising rates – which reduce buyers purchasing power would have an impact on the market. We’ve seen buyers drop out and we’ve seen buyers tighten up on price constraints. This is a recipe for a more balanced market.
As a result, in general, we are seeing homes sitting on the market which may have flown off a few months ago. We are seeing price reductions and less competition. We are seeing homes sell for asking price or slightly less, rather than over-asking.
Homes slightly underpriced will without a doubt still attract multiple offers. Homes in hot markets will still find it to be a competitive atmosphere. For example – if you are trying to buy a cute craftsman in North Park or new construction in Del Sur, be prepared to compete. Big time. In general, desirable homes with all the bells and whistles (that are priced correctly) are still doing quite well, but homes with some downsides are getting stood up by buyers who recognize that the asking price is out of whack.
Now, let me reiterate that this is a macro overview of the market. A generalization. And my overall “feeling” …. there are always exceptions to the rule. The market changes constantly and goes through mini booms and lulls. As I proofread this article, it feels like the market might be picking up again. Go figure…
If you are thinking of buying or selling or just want to talk about the market, talk to a local, full-time Agent about your specific situation. We agents love to drink coffee and gab about the market.
Katie Griswold is a Realtor with Griswold Group @ Pacific Sotheby’s in San Diego, California. Working alongside her brother, John and dad, Bob, the Griswold’s serve buyers and sellers throughout greater San Diego county. To get in touch with Katie, email firstname.lastname@example.org.