After several years of “seller’s market” conditions fueled by low inventory, competition and an appreciating market, buyers may finally be getting a little break—if they recognize and act on it while the window of opportunity is open.
The market is currently experiencing an interesting "pause" that should not be overlooked. There are several factors at play right now that make this an ideal time to buy a new home or investment property.
What's causing the pause, and why is this a great time for buyers?
Competition for limited inventory
After placing offers on multiple homes and being beat out, many buyers decided to take a break hoping for more inventory and for the market to become more buyer-friendly.
With absorption slowing, inventory has been growing. Buyers entering the market now or jumping back in will find many more options to choose from.
Some buyers got priced out of the market while they waited for the market to come down, which never happened.
While housing experts and leading economists predict the rate of appreciation will slow compared to the past several years, residential real estate is expected to continue to appreciate.
On a current median-priced home in the San Diego Metro area, a mere 3% appreciation (the rolling 12 months actual increase as of October was 7.3%) would cost a buyer $20,000.
Recent interest rate increases which finally surpassed the 5% mark, coupled with housing appreciation and limited inventory, took the wind out of the sails of many buyers. The bump in interest rates had an even greater impact on their monthly mortgage payment than recent appreciation.
Interest rates are expected to continue rising, and we could easily experience another half point increase even by mid-2019. Waiting until the spring or summer could add hundreds to the average monthly mortgage payment.
Stock Market Hiccups
Nothing strikes fear in the masses like the stock market taking a roller coaster ride. Buyers began to question the stability of the economy and took a step back.
What many buyers don’t realize, is that when the stock market gets squirrelly, people pull money out of the financial markets and put it into real estate. What does that mean for buyers? Well, let’s put it this way…it’s not likely that prices will come down or inventory will swell as more investor buyers enter the market.
Autumn/Winter, & Holiday Season
While weather has a greater impact in regions that experience harsh winter conditions, shorter days and the holiday season impact sales activity here in sunny Southern California as well. As attentions turn toward holiday activities, family, friends and travel, only the most motivated buyers and sellers tend to be active in the winter months.
Sellers who have their homes on the market during the holidays are often more motivated to begin with. Add holiday slowdown on top of the current “pause” and this might be one of the strongest arguments for buyers to get it into gear now. Buyers will likely find themselves in a fantastic position for negotiating a great deal as sellers watch days-on-market tick by.
Buyers, what are you waiting for?
If the above information doesn't motivate you to get back on the house-hunting horse, consider this; after the holidays, buyers jump into the market in droves, getting more aggressive with their house hunting efforts. Search activity usually peaks around March or April in most states, including California. While there may be more inventory available in the spring, there will be many more buyers competing for those properties. Wouldn't you rather shop in a market with more inventory, less competition, lower prices and more negotiating power and lower interest rates?
Ready to get back on that horse? Contact me today and let's get you into a new home now.