The real estate market is eerily quiet as 2022 comes to a close. After years of record setting numbers, which culminated in the 1st quarter of 2022, the shift came swiftly and sharply in the 2nd quarter. Demand dropped precipitously after interest rates spiked – reaching its lowest level since April of 2008. Smart sellers responded quickly to the plummeting demand by lowering prices and increasing seller concessions to pay for the buyer’s interest rate buy-downs. While the news publicized the large decrease in demand, the equally weakening supply garnered far less attention. Now supply and demand are locked in a seeming battle of the weakest. All of this has resulted in sales dropping a “massive 45% from a year ago” to quote Michael Orr. He continues, “After so many years with strong demand this feels very unusual and a little unnerving. This lack of demand is far worse for re-sale homes than it is for brand new homes, which are experiencing relatively brisk closings and little downward pressure in gross contract prices.”
What will the 2023 market look like? As both buyers and sellers avoid uncertain markets where possible – neither can stay sidelined forever. Demand is more elastic than supply and heavily relies on affordability (i.e. interest rates, pricing, income). A meaningful drop in interest rates could stimulate demand. Sufficient demand will likely bring sellers out of hiding. In short, the spring buying season will tell the tale. When it does, we will be the first to report it to you.
In the meantime, we wish to thank all of our loyal and cherished friends and clients for your support. We wish you all a very happy holiday season and New Year.
Russell & Wendy Shaw