Shift In The Real Estate Marketplace
We are officially into fall, and like season change with cooler temps so does the market. For over a decade Sellers have been Kings and Queens. Buyers did have low-interest rates, but it came at a big cost. Homes were overvalued
Fast forward to the last quarter of 2022 and we are seeing higher interest rates. On top of higher rates, the buyer in the marketplace Has never seen interest rates at 5% or 6% so they are slamming on the breaks. There is also a shift in power. Sellers do not hold all the cards in transactions.
Cause and Effect of Higher Rates
Historically speaking rates have been 5% and 6%. The buyer in the marketplace has never seen it though. higher rates mean buyers can’t borrow as much. Higher rates also mean fewer bidding wars for sellers. It doesn’t mean the home on the market for 700,000 will sell for 6,00,000. Homes on market must be priced right the first time.
If you’re not getting an offer shortly after you are on the market. The issue might be the price. Sellers will need to play ball with negotiating prices and terms with that buyer.
In the last two sales transactions, I have worked with buyers where sellers had to give on price and sometimes terms. I decided to look at each neighborhood to see how many homes sold at the asking price.
South Boston Sales Market
South Boston in August had 47 condos sold, and out of 47 condos sold 16 homes sold above asking. This means 31 home sellers had to negotiate on the asking price and be flexible on terms. If you think well that is only condos in South Boston that had to negotiate on price.
South Boston Single family home marketplace only had four sales, and out of four sales, only one sold above asking.
Back Bay Sales Market
If you’re thinking this trend is just reserved for South Boston it is not happening in my neighborhood. Okay, let’s look at Back Bay and Beacon Hill two neighborhoods before Seaport District came on the market and were two of the most expensive markets for a buyer. Back Bay had 27 Condos that sold in Aug and only 3 homes above asking which means 24 homes sold the seller had to take a hit on their price or needed to be flexible on terms. How about Single-family homes in Back Bay there were no sales in Aug in the single-family home market in Back Bay.
Beacon Hill Sales Market
Beacon Hil 14 sales happened and out of 14 sales 10 sales sold below the asking price. This means only four home sellers got above asking or at asking when looking at Condo sales. Beacon Hill Single family homes only had two sales and both homes didn’t sell at asking or above asking.
What Does it Mean
Does anyone see a trend? Most sellers even in August had to realize if they wanted to sell their home they had to not only be flexible on the price but also had to be flexible on terms.
Neighborhoods that aren’t seeing Shift Yet
When I looked at the following neighborhoods Charlestown, Jamaica Plain, South End, and Belmont buyers might find they have less room to negotiate the price, but with more inventory on the horizon, sellers might experience they do not hold all the cards.
Seller Take Aways
Seller, I wouldn’t say maybe I shouldn’t put my home on market. I would say sellers put your home on market you will still make a profit. The profit might be smaller if you haven’t owned it very long. You will still make a profit. Sellers should ask why are you selling. Are you selling because your family is getting bigger and you need more space? Are you selling out of fear? Sellers don’t sell out of fear. Sellers you must remember real estate value goes up and down, but if you look long term you will find your value will go up more than it goes down. The marketplace we were in for almost a decade wasn’t a normal market. Markets should and historically are balanced when there is enough inventory for buyers, however, the inventory is at a healthy rate where sellers can get a fair market value. The market isn’t tanking it’s making a correction and its correction is long overdue. Sellers shouldn’t panic right now and buyers should be conservative about there offers they present to sellers. Both Buyers and Sellers can be winners in the new real estate market.
Buyers Take Aways
If you are a first-time home buyer this is a great time to be in the market. The market is adjusting, but there are many programs that help make buying a home a little easier. First-time home buyer seminars, Grants like Dreams grant, and MassHousing WorkForce Advantage 2.0 are great ways to make homeownership more affordable.
More, and More folks who have been in rentals might want to look at the sales market. If you can commit to a neighborhood 5 for 6 years buying might be a smarter decision. If a buyer buys a home for $715,000 and puts $50,000 as a down payment after a buyer stays 6 years in the home it becomes cheaper to own than to rent. This doesn’t include any buyer programs that can be taken advantage of if you’re a first-time home buyer. If you thinking about buying here is what I recommend buyers do. Buyers also must be reasonable when buying a home. If you get a great purchase price maybe go easy on the home inspection.
Talk to a mortgage broker, find out what you can afford, and explore all buyer programs you might qualify for. Go to open houses and see what homes are selling for. Circle back to your real estate agent and ask them how they feel the market is. Get organized. Get the strongest pre-approval letter you can get. If you think you will want to do a home inspection figure out three folks you might want to use. Figure out your lawyer and find out if you getting charged a flat fee or hourly rate. Find a general contractor and anyone else you think you might need when you locate your home. Go check out homes, but don’t visit homes thinking the price is overvalued it could be priced right.
Sellers your work starts before you put your home on the market. If you bought a place and got a deal for that new place. Be realistic when listing your home you might need to negotiate. . Mentally prepare yourself you might have to give on that asking price. Do the work your home needs. If there are repairs make them. If the paint is chipped fix it before it comes on the market. Be aware of what the current rate is and how that could impact you when selling. Offer buyers a carrot if it’s buying down their rate for a certain amount of years or paying buyers closing costs. If the price is something you won’t give on then offering the above might sweeten the deal.
Buyers and Sellers Take Aways
Both Sellers and Buyers Though must be reasonable, and respectful. Both must realize that yes rates are increasing but you can date the rate, and you can marry the home at a time. Rates you can refinance and home values will go up and down, but they typically go up more than down during times of inflation. Whether the storm in a home you own is always better than renting. There are many mortgage products so talk to your mortgage broker to make sure you financing your home, and what works best for you.
The adjustment period is happening and it’s a great time to buy a home and sell its a good time for you as well. Sellers yes you can be a landlord and hope the market changes more in your favor, but keep in mind for almost a decade we have seen low rates, and it will take a bit of time for rates to come back down. Thinking about buying or Selling let’s talk and figure out the next move together.