From Buyer Fatigue to Seller Fatigue in a Few Short Months
But what is really and truly interesting right now is how quickly this market turned from being all about buyer fatigue, to now turning into a double whammy of buyer and seller fatigue in just a few very short months.
So, what does this mean for sellers? The truth is your home may be overpriced if it has been sitting the past couple of months.
Real Estate Agents and Sellers looking at “comps” are having a difficult time of it, because prices that were flying a couple of months ago just won’t work for buyers today with these higher interest rates.
Our outlook is that prices will have to drop by another 10 to 15 percent (getting closer to a 5 percent appreciation year over year) before buyers come back into the market and activity picks back up.
The shift happened so quickly – perhaps more quickly than ever in history – when interest rates went from record lows to up over 6 percent in a matter of months. In December 2020, buyers were served a 2.68% interest rate. That is a 3.3% increase, roughly a 124% increase in just a couple of years.
This means that a buyer who wanted a $300,000 home in Dec. 2020 was looking at a monthly payment of $1,214. Now, that same buyer is facing a monthly payment closer to $1,799 (and we can pretty much guarantee, their income has not kept pace with the price increase for them to be able to afford that much of a jump).
So, with price appreciation skyrocketing the past couple of years, coupled now with these new interest rates, you have buyers that are SO fatigued to the point where we are now starting to see sellers get fatigued by their homes sitting and not selling.
The market is stalled out – and it looks to stay this way until we see more inventory come on to the market, which will then help to further drive prices back down to a more normal appreciation rate at which buyers will jump back in to the market.
Until this happens, settle down for the big pause and wait. Because right now buyers are saying, “No Way. I’m out.”