It was inevitable I suppose, after more than a decade of escalating housing prices, two-and-a-half years of a worldwide pandemic, rapidly rising interest rates, rampant inflation, an ongoing war in Ukraine, and the threat of a looming recession (not to mention lack of consumer confidence), that residential real estate would experience a long overdue correction. Welcome to the new reality where "value" is a moving target. Some houses are still selling with multiple offers, while others are receiving little to no activity.
Which is why, after years of "strategic" pricing, with the expectation that the market would easily carry the final sales price higher (it almost always did), we are now seeing movement in the other direction.
"Improved pricing," "transparent pricing," and "new pricing" are all synonyms for a price reduction, which is appropriate, given the state of affairs. But understand as well that market corrections are a natural part of the process in a "Supply & Demand" economy. The tougher economic measures currently underway are purposely designed to tamp down inflation (that's the hope by the Feds anyway) and when it comes to housing, it seems to be doing the trick. (Never mind that it was the business of real estate that kept the economy floating during the pandemic.)
Moreover, no one is likely to escape the adjustments/cuts now required by nearly every sector of the economy (except perhaps, electric cars; they're in high demand!) Now that it's more expensive to buy, the "affordability index" has shifted dramatically. In short, it was easier to buy a more expensive house at a cheaper interest rate, than a less expensive house at a HIGHER interest rate. (Go figure.) Consequently, the purchasing power for many Buyers has gone DOWN, save those still planning on paying cash. (Cash is forever king.)
For Sarah and I, these are difficult discussions to have with Homesellers, but necessary ones just the same, as we work to meet the market where it lies.
This transition period is arguably the most difficult time for Homeowners who are holding onto the hope and the belief that their house is not only different (more special, more desirable, more worthy, etc.) but will somehow still hold the value of last spring's high water mark. (I'm sorry to tell you that it won't.)
Still, life continues. Families expand (and contract), new opportunities lie elsewhere, kids graduate, retirement is on the horizon, and so it goes; an ever-shifting landscape of choices to be made . . .
What's the answer?
To move through it with the understanding that Buyers will now have more choices as Sellers rush to bring their properties to market. While Sellers may have mistimed the top of the market, they'll be damned if they'll wait for the trough. (Expect A LOT of inventory in the fall.)
On the other end of the equation, Buyers are not only going to be looking for "bargains," they're going to be more discerning as well which means that impending repairs you might have passed on to anxious and desperate Buyers a year ago should probably be addressed prior to bringing your property to market. The fewer hurdles a Buyer needs to jump over, the better; "turn-key" is going to take on a whole new importance.
I'm talking sewer laterals, sidewalk repairs, pest & termite eradication, leaking faucets, drainage issues, etc. In other words, if a move is in your future, take a discerning look at your property and start the repairs now.
Contractors, subcontractors, plumbers, electricians, roofers, and inspectors are all backed up - for months, not weeks - which, unfortunately, has a corresponding effect on every element of the project. Speaking to one of our "go-to" contractors this week, he bemoaned the fact that even the scaffolding company he uses is now unavailable.
"I'm sorry, Julie, I'm spread too thin as it is," he said. "I wish I could help you." (We do too.)
In other words, patience, proactive measures, and realistic expectations are the new normal. (This is all going to get very interesting.) So whom you choose to work with is more important than ever.
How can we help you?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.