As we say goodbye to another mild New England winter, we are
looking at another early Spring real estate market. Early indicators
suggest that we will see a similar first and second quarter to 2023.
That was a market that saw the fewest sales in over 20 years! If
you think that interest rates played a big factor in that outcome,
then you would be correct...however, probably not for the reason
you are thinking. Sales were not down because of a lack of buyers
looking to enter home ownership (even with 7+% interest rates,)
no, it was the “would be sellers” with the sub 3.5% rates that are
holding back the real estate market. It's easy to see why sellers
are reluctant to double their interest rate, but our market
desperately needs those homes to arrive soon. And I think they will
in 2024.
THE WAITING GAME...
In the last 14+ months I have talked to several clients that no
longer love their living situation, whether it be that they have
outgrown it, the location is no longer ideal, or they are just looking
to make a change. Many of these “would be sellers” have decided
to stay...for now. I believe this will be a temporary snag. Sellers will
only put off selling for so long because of the interest rate alone.
The longer this becomes the norm, the more sellers will adjust and
start to enter the market. I believe we will start to see this in
quarter 2, which aligns with the New England Spring market.
What does this mean for the local market?
If this holds true, then we should see a temporary surge in entry
level homes, particularly condos and starter homes. In many
communities, those homes have had the fiercest competition
during the past 2+ years. In addition, we should see a surge in the
$600-850k range for those families upgrading.
Contingent on Seller finding suitable housing...
Get used to this language as I believe we will see a lot of sellers listing their homes with this term in place. The short definition to this is, that the seller is only agreeing to sell, IF they are able to find another suitable property. This can make things very tricky at the
time of offer, for both seller and buyer, and there are pros and cons to adding this language to any contract. Clear terms MUST be outlined and expectations transparent! This is where my experience
really comes in to play as far as protecting the client. I believe there are much better ways to sell simultaneously, than using this contingency.
WHAT IF? AND IS IT PROBABLE?
What if rates fall to the mid to high 5s? When I first wrote this article,
I thought this was a very possible outcome for 2024, but have since backed
off some as recent reports suggest closer to low-mid 6s . But If rates do dip
into the 5s, there will likely be a market shock. More listings and more buyers
all jumping at once, creating more volume and yes, still more competition. Refis
will start back up and we would be on our way to a more traditional market, as we
come out on the other side of things...although that will probably take time.
In the meantime...
Sellers stand to benefit the most with the current market, as there have been many
properties that have sold for considerably over list price. This is a direct result of the
lack of inventory and high buyer demand. We have no real way to tell when this
opportunity will expire. When it does, sellers will have potentially missed out on a very
rare chance to take fair market value and multiply it by extreme demand. Much like the 3% interest rates, we may never see it at such an extreme again. So, if you have been considering selling to capitalize on the inflated values, it very well may be that NOW IS THE TIME!
CONCLUSION
So much has changed in Real Estate and in the way business is done. In fact, It's incredible
to think how much has changed from just a couple years ago. As always, I pride myself on
staying on top of market trends and having the latest information to form a winning strategy together. If you, or someone you know, may be looking
to buy or sell real estate this year, please reach out any time! You know I will take excellent care of you and those that you refer!