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Is a softer real estate market on the horizon?

Growing up in rural Nebraska, I learned from farmers how to watch the sky and predict the weather. Literally, a year’s income could be lost in one storm.

An old timer’s favorite saying was “if you don’t like the weather, wait 5 minutes” because of dramatic weather changes that were part of daily life.

As you can see, I love analogies – from watching ocean waves like a pro surfer to midwest famers, we can learn to watch the horizon for changes in the real estate market.

What’s the “buzz” about high priced competing offers?

News reports on real estate market trends have a lag time of 2-4 months. What you’re seeing on major news channels like CNN about crazy home buyer bidding wars is from market data created by negotiations during February and March.

Sales data is not public until the transaction closes. Reports on the prior month’s sales aren’t publicized for at least 2-4 weeks. Even cash transactions can take 30 days to close due to title issues and buyer and seller preferences. That means a sale negotiated in March won’t show in statistics until May or June.

Many news sources like Bloomberg.com have reported that the hot, competing market is “not a bubble” as we saw in the mortgage crisis. However, it is a unique spike in values based on supply and demand, driven by changing economics and lifestyles as a result of the COVID pandemic.

What drives real estate market values?

It’s important to understand market changes created by unique external dynamics are temporary. Economists predict two factors will impact real estate values;

1) increase in interest rates, and 2) increase in inventory. Both have been shifting.

For expert insights on how inventory changes affect home values, listen to insights from leading economist Kevin Gillen:


Where are we now?

On a national luxury agent mastermind call this week, all reported a softening demand in their areas. Inventory is still tight, and values strong but there’s a shift underway. Not only in the luxury market, as reported by Realtor.com – The Housing Market Shows Signs of Softening – Has it Topped Out?

Inman News also highlighted a downward shift during May – New Home Sales Shift to 1-Year Low:

New home sales are still up 9.2% year over year but have been falling since March, likely as a result of high home prices due to the rising cost of construction materials like lumber…..After breaking from its upward trend in April, new home sales fell 5.9 percent to a seasonally adjusted annual rate of 769,000 in May, a one-year low.

Inman News, June 23rd

Market shifts

Market shifts and results vary by neighborhood as well as suburban vs. urban and depend on the type of property – condo vs singe family home.

As an example, in a recent article from Bloomberg.com highlighting New York’s housing frenzy with prices escalating at a pace we haven’t seen since the mortgage crisis, the comparison of Manhattan to Queens closely mirrors Center City vs the Main Line.

Should I worry? Even without an outright crash, big mortgages mean borrowers are vulnerable if interest rates rise and buying is getting increasingly out of reach for younger people. But countries expect the market to cool on its own, especially as the action is being driven by owner-occupiers rather than investors.

Bloomberg editorial comment

Center City Condo Market

It’s hard to say if shifts since market spikes in February and March are simply due to summer vacations, or indications of longer term trends.

What’s important is to watch these trends carefully, and move quickly to maximize your results. For example, in the Center City condo market which was hit hardest by COVID, there are improvements in Rittenhouse Square’s month’s of inventory while MidTown condo market remains extraordinarily soft.

Trends on the Main Line

On the other end of the spectrum, the supply of homes on the Main Line remains very low with little change. As an example, May residential sales statistics for Gladwyne and Bryn Mawr reflect contracts negotiated in March and reflect a continuing shortage of inventory;

How do inventory changes affect buyers and sellers?

If you’ve considered selling, don’t wait! No one can predict if the values and demand we are seeing currently will be the same in 6 months or a year. Let’s strategize on how we can make this a smooth and successful process for you.

If you’re thinking of buying, keep your fingers on the pulse of your micro-markets. For our clients, we track buyer activity that shows the level of competition in addition to market trends for inventory and pricing.

Our clients can then make an intelligent, informed decision about when is the right time to buy, as well as be prepared for successful negotiations.

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Susanna Kunkel

Susanna Kunkel brings her experience from a career in the executive offices of major corporations to her real estate business - treating each client like a CEO. With 17 years of experience selling luxury real estate, you can be confident in knowledgeable, personalized, confidential service. Hear what her clients say - www.AskMeAboutSusanna.com

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