Happy New Year! Cliff and I celebrated with dear friends in the City, stayed at The Palace Hotel for the night (elegant), enjoyed John Mulvaney at the Masonic Temple (a gifted comic & storyteller), followed up his performance with a late-night dinner (too much food), and stayed awake long enough to welcome in the new year (way past my bedtime).
Despite the heavy downpour, the skies had cleared by the time midnight rolled around, allowing us to leisurely stroll back to the hotel via Union Square, which was alive with glow-in-the-dark balloons, sparkling partiers, and families with young children determined to stay awake. All in all, it was a festive and lovely way to bring in the New Year. I couldn't be more grateful.
Now that the holidays are behind us, it's time to get our heads back in the game . . .
However, "the game" is going to be decidedly different in 2023 than it has been the past few years when historically low-interest rates, coupled with scant inventory (rocket-fueled by the unexpected COVID migration) created "the perfect storm" for Sellers. That was yesterday's news. Hello, 2023.
As the Federal Reserve is expected to raise interest rates yet again come February 1, by at least 0.25 - 0.50%, it follows that the housing market will continue to correct (which frankly, is what the Feds have engineered).
No one, no one, NO ONE expected housing prices to soar as outlandishly as they did - skyrocketing 45% from December 2019 to June 2022 according to Standard & Poor’s Case-Schiller Home index - but there you have it. This unsustainable rise (by any measure) is why the Federal Reserve took aggressive action to correct a market that was seemingly WAY out of control. (It was.)
However, it's important to note that the Fed's mandate is to control inflation and maintain high employment, NOT to address housing market woes. As their stated goal is to bring inflation down to no more than 2% annually, the economy has a long way to go. (Inflation ended the year at 7%. after topping out at 9% in June.) Consequently, (and like all consumer goods), housing will feel its share of pain. In other words, we haven't hit bottom yet.
That being said, properties will still come to market, AND Buyers will still covet good homes as circumstances dictate, but our conversations around expectations are going to be vastly different with respect to how these stories play out. While the concept of "priced to entice" will undoubtedly still be important, the days when Sellers could expect outlandish bidding wars are definitely behind us.
In fact, my last three BUYER transactions in 2022 all involved successful sales below the list price. More importantly, the Sellers on the other end of those sales understood the changing dynamics of the marketplace, thus, were both realistic AND highly motivated. (It's all about pivoting.)
Lucky Buyers? No, savvy; they still paid a premium for Bay Area housing relative to other markets, but they didn't "overpay" by having to compete with a long line of competitive bidders. (For the record, Buyers don't "overpay," they pay what the market will bear, but you get my drift . . .)
Whether over or under the list price, you can count on Buyers establishing true "market value" regardless of what Sellers believe their home is worth, what they want, what they need, or what they must have. In other words, the market, is the market, is the market . . . and the market is set by a willing and qualified BUYER. No Seller has the power to change that - nor does any single Realtor® - we can only work with the market at hand.
So what should we expect in 2023?
Finally, if the unprecedented highs of 2021-2022 are your intended goal, we encourage you to wait for the next BIG bull market (which may be several years down the road), but if selling THIS year is part of your 2023 action plan, and IF you've adjusted your expectations accordingly, AND IF you appreciate an honest conversation, we're here to assist in any way we can; it's a journey we've become very adept at.
But make no mistake, misleading you about the value of your home in order to achieve your listing? No thank you. No one, no one NO ONE benefits from those kinds of fireworks.
How can we help you?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 750 humorous but always informative, essays on life and real estate.