If you’ve ever watched a baseball game and seen the team in the field looking out of position, you know the manager has called for the shift. A shift is a term used to describe the situational defensive realignment of fielders away from their “traditional” starting points to increase the likelihood of making a play.
What’s that have to do with real estate?
For the first time since July 2020, there are more homes for sale, than homes that sold the previous month. Things are changing, but let’s put that in context.
As of August 9th, there were 592 homes on the market “around the horseshoe” of the 118, 23, and 101 freeways (Simi Valley, Moorpark and the Conejo Valley). But in June 2019, there were over 900 homes for sale. Inventory still favors the seller, although the pace of sales, the number of showings, the listing price, and the number of offers made on a listing are less feverish than in recent years.
The shift is on, but it’s no time to panic. It’s just time to adjust the play.
While some of the factors moving the market have been in play since the beginning of the year, it took until May for the real estate market to react. And then, the reaction felt sudden.
I first experienced it in May when we were bringing a home on the market in Simi Valley. Two homes in the same neighborhood came on the market about a week before my client’s home did. I spoke with both listing agents and found out that in the first week on market, each home had 5 or 6 showings, and no offers. While in a traditional market this would not be noteworthy, this was a clear signal the market was changing. Both homes took about 3 weeks to get an offer. In the last 2 years, we would have likely seen 30-40 showings and 10-20 offers in the first week.
Does it mean that prices are dropping quickly? Foreclosures looming? No. Though, it is a signal of big changes to what we all experienced, and got used to, in the real estate market the last 2 years.
The biggest influences are recession fears and the Federal Reserve’s big interest rate hikes, moving mortgage rates from under 3% to over 6% in a few short months. Buyer’s purchasing power is slashed, putting pressure on home prices. Prices need to adjust downward to attract more buyers that can afford the house.
As for multiple offers? In the past 2 years, we’d received 20-40 offers on a home. That meant 19-39 active buyers didn’t get that house. Their search continued in a low inventory environment pushing prices higher. Inventory may be historically low, but so is demand…right now.
Before you grab a box of tissues thinking you missed another market bubble, consider my recent listing in West Hills. We had an initial pricing conversation in April and went on the market at the beginning of July. A lot had changed in 3 months so I set up a conversation before going on the market.
My job is to take the emotion out of real estate. The environment is what it is, no matter how we feel about it. I advised my client to lower the price $25,000 from our April conversations and 23 days later, we received 1 offer. As they say, it only takes one. At full price, my client was thrilled.
What does this all mean? Is it still a good time to buy or sell?
It feels like talk of the market being at a top or not is more suited to cocktail parties and dramatic headlines of news articles. Real estate decisions are typically dictated by life circumstances, (such as retirement, job relocation, marriage, divorce, birth, death, inheritance, moving to assisted living) as opposed to market conditions. If you are selling and then buying, you are transacting in the same market. As a buyer right now, competition has dramatically decreased. If you buy now and interest rates go down, you can refinance. If interest rates go up, you’ll be happy you locked in your rate now. If you are thinking about selling, while we aren’t at the top of the market, you’ve realized dramatic, unprecedented and unexpected gains in the last 2 years and are far ahead in value from where you were in February 2020.
There are always a great deal of factors to consider when buying or selling. If you have questions, let’s set up a time to discuss how real estate may be part of what’s going on in your life.