Where Is The Market Going?Neil Bada
Where Is the Housing Market Going?
Welcome and good morning to Mike Ferry TV, the week of May 23rd. Just saying May 23rd out loud is surprising because boy has the first part of this year sailed by quickly with a very fast paced and exciting Real Estate market that is changing every day as we speak.
And with anything else in life and business, we’re involved in a little change and a little downward trending cycle that’s being predicted by everybody. I think all of us who watch Mike Ferry TV are cognizant of the fact that the market is changing.
So, the question I’ll answer today is, where is the housing market going? The question I’ll answer next week is, what’s causing the [housing] shortage? And then three weeks from now, I’ll talk about some of the solutions that I think all of us can participate in.
So where is the market going? There are several factors that I think if you’re a listing-oriented agent, you’ll understand as I present them. And I think the first thing we have to understand is that, you know, it always has been said the listings are the name of the game and I’ve changed that expression a little bit, to listings are how we stay in the game of selling Real Estate.
Because without inventory and you know what’s interesting … And I want to interject something here that was not in my notes. I want to interject the fact that we believe that only Real Estate has an inventory shortage.
Go into a jewelry store and try to buy a watch. Can’t get it. They don’t have any inventory.
Go into a car dealership and try to buy a car. Can’t get it. No inventory. So, inventory shortage is a worldwide problem today.
And it’s talked about more in Real Estate because there are so many Real Estate transactions annually and the size and the amount of our transactions are so big compared to buying a watch.
So where is the market going? Days on market are extending. You have to understand days on market is extending and will continue to extend and that’s happening all over the country.
Now there are some hot spots and I hope you’re in one of them. And one of the hotspots is Phoenix, Scottsdale. Obviously, most of Texas, almost all of Florida is a hotspot, North and South Carolina, the greater Atlanta area, and possibly an area that you’re living in that I may not have recognized. But, generally speaking, days on the market are extending and will extend more as the year continues.
Also, we’re seeing more Expired Listings for the first time in a long time. There are fewer offers per listing, which shows the change and the decline in the market. Three or four or five months ago, 10, 20, 30 offers were common. Now, if we get three or four, it’s considered pretty good. The amount of offers and the days on market are always signs that a market is changing.
Interest rates will continue to rise. I tell people all the time that the 1973, December of ‘73. I had three of my listings sell. They sold FHA. Interest rate was 18.5% for a 30-year fixed loan. We might hit 7% by mid-summer. Who knows?
Now, with that being said, we’re going to have less first-time homebuyers because of [higher] interest rates and prices. If you’re a specialist in first-time homebuyers, which is a very rewarding part of our business, you’re going to see that part of the market probably decline the fastest.
Where’s the market going? [Home] prices are starting to flatten out. And in some areas, we’re working on price reductions all the time. I’m getting calls from our clients saying, “Hey, Mike, where are those price reduction scripts that we’ve always had?” So, we’re sending out to a lot of our people the price reduction scripts because we keep listing them up here because of inflation and because of rising prices and because of demand. And all of a sudden there’s not as many offers.
So now we have to start talking to those Sellers about a price reduction, which is not a comfortable conversation because we and they were hoping for this high price. And if it’s not there, price reductions are taking place and inventory in many areas is actually increasing as we speak. It’s actually increasing, and we see this all-over North America.
But the other thing that is causing the change throughout the course of this year, the Covid Buyer pool. Which after March, April, May, when COVID first closed down the country, June, July and August, there was a surge of Buyers in Real Estate that we had never seen before.
Let’s take an example. If in a normal year we have, say, 2.5 to 3 million Buyers. Well, with COVID, we had 5 to 6 million Buyers. Most of those Buyers have either purchased a home or changed their mind. So, the whole Covid Buyer pool is diminishing as they have bought, decided not to, or just disappeared.
So, we have to look at the fact that the market is changing. And for those of you that started in Real Estate in the last 3 to 4 years, you haven’t been through one of the many, many, many, many ups and downs cycles that we’ve experienced. All you have seen is this cycle. And it has been wonderful. It’s been exciting. Commission checks are the biggest we’ve ever seen. Prices are way beyond what most people can comprehend. And the speed with which listings sell has, of course, been a huge factor. Well, that is all changing as we speak.
And I know that your Broker, your manager, if you have a Coach, your Coach, my message is pay attention to the market stats in your area. Start watching MLS stats every week and you’ll see a lot of these things I’m talking about taking place. So short message today. It’s the third week in May. It’s time for a lot of us to get going, get moving and do something. When it comes to listing property and the Sellers are out there, they’re prepared. Are you? And if you’re not, talk to us and we’ll help you prepare. Talk to you next week.