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Are We on the Verge of a Major Real Estate Market Shift?

Mortgage rates recently went up over 6% after experiencing record lows during the pandemic. Inflation has also impacted our economy. The real estate market remains active, but the tides might be changing. We could be on the verge of a major market shift, especially if certain economic factors keep trending in the same direction.

In this article, we want to look at today’s real estate market conditions and how different factors are affecting home sales. What is in our future when it comes to home prices, housing supply, buyer demand, days on market, and other key indicators? 

Housing Supply vs. Buyer Demand

The data right now is still a little premature to fully predict the future of the real estate market, but we are seeing some signs of change. We still have very low inventory without many houses on the market. This is keeping the market active and homes are still selling at good prices. The rate of appreciation is starting to level out, though. Home values are going up, but not at the rapid pace they were over the past couple years.

Buyer demand has been tailing off a little with the rising mortgage rates and inflation. However, there is a large millennial demographic keeping the buyer demand fairly strong. Wages have gone up along with inflation, cost of living and the general economic recovery coming out of the pandemic. Buyer demand should continue to outweigh supply for the near future.

We are seeing some buyers starting to hold off or get out of the market. These are potential homeowners who may be in weaker buying positions, so they aren’t prepared to pay a high purchase price and a higher mortgage rate. For those who can afford to buy, it is still a great time to purchase a home. It’s rarely a bad time to own real estate as a long-term investment. In addition, mortgage lenders are starting to offer more adjustable-rate mortgages (ARMs) instead of fixed-rate loans. 

Is the Real Estate Market Going to Crash?

The real estate market may slow down some in the days ahead, but we are not headed for another crash like 2008. The economic conditions are completely different. Even though ARMs are gaining in popularity again, we are not dealing with the sub-prime loans and reckless lending that led us to our last big housing crisis. 

Changing Expectations for Buyers and Sellers

Home buyers and sellers both need to shift their expectations. Home buyers can be a little more patient and may not have to concede as much when making offers. Home sellers can expect somewhat slower sales, though the best houses are still getting bought up quickly. A well-prepared property and professionally marketed listing can attract more buyers. There may be instances with multiple offers. There just won’t be as many and the price increases may not be nearly as dramatic.

Some home sellers are nervous that they missed their window—the opportune time to sell for maximum value. It is still a good time to sell with high prices and solid buyer demand. The days on market are going up on average and some overzealous sellers have had to offer price reductions when listing too high. If everything is done right, today’s home sellers should have no problem selling their properties and getting excellent returns on their original investments.

What Happens Next?

It may take another month or two to see how things continue to develop in the real estate market. For now, there is no reason to panic on either the buyer or seller side. If it’s the right time to make your move, then be prepared and take the right steps to make the most out of your experience.

If you are buying or selling a home in Southeastern Pennsylvania or Northern Delaware, contact The Cyr Team today. Let us help you make the right real estate decisions and navigate today’s unique market conditions.

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