What do you think of when you hear the words, "The Perfect Storm". I am guessing that would depend on where you are, what you are doing and what is important in your life at the moment. In real estate, we might say a perfect storm is when it is the perfect time to sell AND the perfect time to buy.
So much of what we are hearing is how terrible the real estate market is. With rates up, inventory growing, inflation out of control, people are being priced out of their normal living expenses... you might call that a Hot Mess! I see a silver lining for those looking to make a move.
Let's start with rates... today's 30 year mortgage rate averages 6.5%. That seems like a crazy high interest rate, however, Freddie Mac has been keeping record of mortgage rates since 1971, and the average 30 year fixed mortgage rate since 1971 is 7.76%. The highest mortgage rates were found in 1981 with an average of 16.63%. The lowest 30 year fixed rate mortgage rate was found in 2021 at 2.96%, but since 2012 the rate has been under 5% - for 10 years! So of course anyone who has been thinking about making a move over the last 10 years is concerned about the current mortgage rates, but putting that into perspective, we are still under the average mortgage rates in 50 years! Economists are forecasting once inflation gets under control (expected in the next 12 months) that rates will settle in at an average of 5.5%-6.5%. This is good news for buyers!
Next, let's talk about inventory. IT'S LOW! The inventory numbers according to the media is rising. It is true, however, that is not due to new inventory, but rather to inventory that is staying on market. Today there is currently 2094 single family homes for sale in the Cincinnati MLS; of those 2094 single family homes for sale, 86 of them are new listings today. In April we had 1198 active inventory, 2,496 new inventory and 2 median days on market. In October (last stats pulled) we had 2188 active inventory, 1975 new inventory and 6 median days on market. So as you can see, our inventory really has not changed, but due to the increased days on market the media has gathered that inventory is increasing when in actuality inventory is sitting. This is good news for sellers!
Next, let's talk about market value. It's still positive! The average increase in market value historically has been 3-4% - intended to increase at the similar rate of cost of living. However, over the last few years, we have seen double digit increase in market value - 2020 came in around 15% increase year over year, 2021 came in around 16-18% and 2022 was sitting around 15-16% in Q1-Q2, but has since adjusted to 8-10% and is expected to end the 2022 year around 7-8% increase over last year. This means sellers have a nice equity egg they are sitting on and have more room to negotiate. For buyers, this means overpaying for property is soon becoming a thing of the past. This is good for buyers and sellers!
Lastly, let's talk about negotiating. This is the last element to the perfect storm! Some sellers and realtors are hanging on to the Q1-Q2 market and pricing and listing properties as if we are in that market. However, news flash... we are not! With the interest rates increasing many buyers have decided to sit on the sidelines, shrinking the number of buyers interested in each property. Along with this shrinking interest, buyers are paying more for the same home they would have paid $200-300 less for in Q1-Q2 in their mortgage, so they don't have as much cash flow to make repairs and they are expecting the home to be in good condition/move in ready. With buyer competition at a low, this makes the perfect time for buyers to buy! Buyer's are not having to write offers $50,000 above list and waive inspections and appraisals, with the low competition. Now, if the seller partners with a knowledgable realtor and follows their advice to prepare the property in exceptional condition with updates and no differed maintenance and prices it right based on current (last 30 days) data, sellers can very well still be pleasantly surprised with strong offers and possibly even multiple offers - remember, inventory is still very low, so if your property is market ready with updates and maintained and priced right, there will be more than one buyer interested in making an offer.
Low Inventory + Reduced Buyer Competition + Market Values hovering around 7-8% increase over last year = The Perfect Storm - or rather the perfect time for sellers to sell and buyers to buy!
The Norris Group with Coldwell Banker Realty is ready to help you with your real estate needs! We are here for you when you need us!
Lesli Norris and Terri Cofskey