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As we begin 2023, everyone is asking about what we can expect in the real estate market this year. There has been a shift. As expected, there’s less demand in the residential market because of higher mortgage interest rates.
This may make some sellers reluctant to list their homes. At first blush, it sounds as if there is more supply than demand. But that simply isn’t true. It’s important to look at the big picture.
The truth is that the housing market isn’t even close to being balanced. This shift is taking place in unprecedented circumstances. According to an article in Calculated Risk, there are 31.8% more homes on the market this year than last year at the same time. There are even slightly more than in 2020.
Sellers seeing those numbers might think that the market is flooded with homes for sale. But a real estate agent will and should have them look back to 2019. It makes a lot more sense since that’s the last year the market was unaffected by the pandemic.
COVID-19 Affected the Real Estate Market
The pandemic housing market was atypical. Demand soared, along with home prices. New home sales set records. Sellers were regularly receiving multiple offers above market value. Builders struggled to keep up with new home construction.
With historically low interest rates, the market was very attractive for first-time home buyers and those looking to relocate or buy a larger home. Cheaper mortgages allowed people to buy more expensive homes. Renters turned into buyers.
For two years real estate agents saw the market set record after record. In a word, it was “nuts”. We all knew that, at some point, the overheated market was going to cool.
The Big Picture Tells the Story
Sellers looking at the current market may feel discouraged by the recent cooling. But they’ll feel differently when they look at the pre-pandemic market. There are currently 40.7% fewer homes listed than at this time in 2019.
The housing supply is very low. The surge in pandemic buying reduced the number of available homes. Buyers still don’t have a lot of choices.
Demand is Getting Back to Normal
Even though supply is low, sellers will have a different experience than they did a year ago. There is no denying that high home prices and rising interest rates have priced some buyers out of the market. Demand has decreased from its nutty pandemic heights.
Recent data from the National Association of Realtors shows that demand is returning to the levels seen in 2018 and 2019. So, demand has not disappeared; it has returned to more normal levels.
The Big Picture for Sellers
To sum this up, here’s what it means for sellers. They’ll probably have fewer showings and offers than they would have last year. But they will still have both. Demand still outpaces supply.
If you are thinking about selling your home or just have some questions about the real estate market, please give me a call. I’m happy to help. I look forward to hearing from you soon!