Is the Market Cooling?

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The Market Sure Seems to be Shifting

So, what’s going on? Well, for starters, don’t panic. It makes sense. We’ve been in a seller’s market since about 2011. Due to more buyers than sellers, prices have been pushed up up up. In other words, the scarcity of available homes for sale has put upward pressure on prices.

I know what you are thinking. That you’ve heard this a million times. And that it sure feels a lot like the years that led up to the Great Recession.Well, this is the part where I tell you I can’t predict the future. But I can tell you that I think we are heading into a more balanced market.

Rising Prices

Prices have gotten so high that buyers are finally starting to push back. Even if a property “comps out” at market value, buyers aren’t biting. As a result, homes are sitting on the market longer and sellers are making price reductions. Sellers are also being more reasonable during negotiations because there aren’t a bunch of other buyers at the table. That feels like a more balanced market.

Buyers Dropping Out

We are also seeing buyers drop out of the market because they look at what’s available in their price range and decide to pass. So, not only are buyers pushing back on prices, but the pool of buyers in the market is decreasing.

Rising Interest Rates

And then, of course, interest rates. We’ve had two increases this year and potentially two more to go. While rising rates are a healthy sign for our economy, it reduces buyers’ purchasing power, making the same home even more expensive.

Sub-Prime Mortgages

Also, sub-prime mortgages aren’t happening. Lending guidelines are tight. If you got a loan in the last 10 years, banks have made sure you could afford it.

Appraisals

Appraisals are courtesy of an independent third-party company. The industry has seen many appraisals come in low over the last several years. This is a safeguard against homes selling for inflated prices.

Balanced Market

So, what I’m seeing is a shift towards a more balanced market. This shift appears to be starting at the middle to luxury price points and is slowly trickling down. There are still some micro markets that are very competitive in the lower and entry-level price points.

In the end, there is always the potential for a correction. Historically, one might argue that we are due. However, at this time, it appears that market fundamentals are healthy. The slowdown that we are all feeling is a logical response from buyers who have had enough of rising prices and interest rates.

 

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 griswoldgroupproperties@gmail.com.