"Unless we can get 'X' for our house, we're not gonna sell it," has been a repeating refrain on many of our listing appointments as of late.
Fair enough, it's your house, and you're the captain, but if "X" equates to last April's potential outcome HAD you sold the property in the spring of 2022, good luck achieving that unlikely, unrealistic, and ASPIRATIONAL expectation. In short: "that ship has sailed;" "that window has closed," and to be perfectly blunt, "you missed the boat." (Take your pick from any of these well-worn metaphors.) In other words, HINDSIGHT is 2020 . . . & 2021 & 2022! (See how I did that?)
While Sellers would no doubt, love to "ride the wave" a little longer (Realtors, too), the fact is that COVID, along with artificially low-interest rates (courtesy of Uncle Sam), coupled with significant shortfalls in inventory, created the "perfect storm" for home sellers. Barring another worldwide pandemic, industry experts don't expect such unusual events to collide anytime too soon. (In reality, we're more likely to experience another pandemic before we see interest rates below 3% again.)
Moreover, while Buyers didn't love being on the opposing end of a Sellers' market, the upside was that historically-low interest rates made homeownership far more approachable and affordable, as opposed to today's lower prices, accompanied by higher interest rates. Sadly, the affordability index is at an all-time low at only 18%. Imagine how those numbers play out in 2023 if interest rates are higher still. (Click here to read about "The Tangible Impact of Higher Interest Rates" provided. by Brady Thomas of LaSalle Mortgage.)
More unsettling in our neighborhood perhaps, is the fact that when it comes to housing, "the bigger they are, the harder they fall." (There's no shortage of these pithy adages). In truth, these unprecedented increases in equity during the last two and a half years were an anomaly - NOT the norm. Accordingly, ALL segments of the marketplace are going to feel the pain of this long-overdue correction but multi-million dollar properties are going to feel these cuts more deeply. (They have further to fall.)
Additionally, sales volume year-over-year for October 2022 is down 43% in the Bay Area marketplace and listings are staying on the market significantly longer. So with all due respect to how much "better," "special" or "more fabulous" your home is (and let's assume that it is) unless you're willing to price your snazzy shack to attract, you may find your property "twisting in the wind" (I'm sorry, I can't help myself). BUT if you are counting on prices to rebound in the Spring of 2023, that's probably "not in the cards," at least not in the near term.
If we look back at 2008 as a reference point, prices declined for three years before a recovery began to take shape in 2011. As the current marketplace has yet to hit bottom, a quick rebound isn't necessarily on the horizon.
How long will it take to get back to 2021/2022 highs?
That's anyone's guess, but it isn't going to be tomorrow, next month or next year, although inflation may finally be peaking per the CPI numbers (Consumer Price Index) that came out earlier this week, potentially pushing interest rates in a more favorable direction??? (Please.) Even so, buyer confidence is an important piece of the puzzle and Buyers have stepped back en masse.
Absent a crystal ball, I suspect prices will continue to correct in 2023. Inventory will remain low, and Sellers ARE going to begin to make concessions to get Buyers back in play. Whether it's coming to terms with the current market values, offering to buy down points on a Buyers' loan, crediting closing costs at the close of escrow, or providing Seller financing, we ARE going to start seeing creative solutions in response to a less-than-frothy marketplace. (Buyers, this may be your time to take advantage.)
And if none of those solutions seem viable to you as a Seller, then, by all means, hold onto your property and wait for the next UP turn because the value of your real estate is only relevant when you SELL IT. (All markets are cyclical). Eventually, the market will swing in your favor once more. Let's remember, that real estate purchases are meant to be long-term holds.
On the other hand, if you are truly ready to sell, there's absolutely a qualified Buyer waiting to buy your home, and that's the "silver lining" . . . but not at last year's prices. (Are we clear on that?) Irrespective of the micro- or macroeconomics of the world, circumstances change: couples move in together, babies are born, loved ones pass, divorces occur, kids go off to college, jobs get transferred, and folks ARE still going to need homes in which to live, love and laugh (and that's no cliche).
If "what goes UP must come down," it's also true that "home is where the heart is."
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Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.