The Market is down approximately 10% from the peak of 2018. We’ve had an aggressive surge of activity so far in 2020 driven by a lack of inventory and motivated buyers (typical seasonal trend) – see more about this in my past article here. This is a typical phenomenon that I do not think dictates the market trajectory for the year, but it does get emotions running … lots of anecdotal stories about homes selling way over asking price with lots of offers, etc. But these stories only drive the euphoria for a short amount of time, until inventory picks up, which it always does, in spring. At the same time there are plenty of homes that aren’t selling as aggressively in any given community.
Sellers who sell early in the year tend to get an early-season bump in price. This home sold for more in early 2020 than it would have in 2019. These early-season conditions typically change by late Spring.
Once the early spring inertia is gone, we will see more what the year will look like. By June, I typically have a good sense on market factors and share that with clients.
But, the market energy experienced thus far in 2020 may be coming to an end sooner than usual. Over the past few weeks the equities market had the largest drop, then swing, since the financial crash and the coronavirus is not only impacting lives, but the global supply chain that will impact practically every industry in the coming quarters. It is too early to gauge what the fallout will look like, but I think it is safe to say it will be more significant that we see right now. Companies are just now running out of inventory and raising the flag on this issue, not to mention the lack of commerce across the board: from going out to dinner and the movies, to travel, and just plan consumerism. The economy can slow quickly when people don’t spend. This is the kind of push the global economy needs to fall into a recession, which is more likely now than people thought in 2019. The coming weeks and months will really show the global impact to the economy due to the lack of spending.
By no means am I a fear-monger – I actually see these kinds of corrections as opportunities. I simply want my clients to be aware of variables impacting the market in order to make sensible decisions.
What to Expect in the Coming Months
- Low inventory – usually inventory picks up by April, but motivated buyers have fewer options early in the year. Out of those buyers, many will be hesitant to make a purchase decision because of current market uncertainty, but good properties that are presented well are always in demand
- Hesitation – many buyers are out shopping, but are cautious on making purchase decisions. I think the hesitation will continue longer than normal especially because we are in an election year in addition to global recession concerns
- Low, low interest rates – interest rates are still insanely low. I personally don’t want to miss this opportunity, so Melissa and I are currently looking for more real estate investments
- Down payment funds – if you haven’t already, you may want to consider having your down payment funds in cash or else you may be short on funds if you need to sell during a market downturn
Seller: “Should I Sell Now or Wait?”
That’s the most common question I hear from sellers. Once a market peaks it typically takes several years to fully rebound. If you are considering selling, I think it is important to know that there are always buyers looking to purchase in our communities, but during a slower market they are just more specific and discriminating on home condition, location, smells, etc. I had a seller tell me last week that he wants to wait to sell until the market gets to peak price again. I let him know that likely will be a while, so sellers need to decide on what is driving their decision. If you are not in a hurry to move, then maybe sit through the next market cycle and sell in the next upswing. But if you are selling for a change of life, you may not have the luxury of waiting for the ideal seller’s market. Even in the current climate, there are some properties selling at peak price, but those are more exceptions than the rule.
Why Consider Selling Today?
Continual Market Decline: There is no clear path to the rebound (i.e. timing)
Liabilities of Homeownership: Costs, maintenance, or just impractical (stairs, living arrangement, etc)
Better Alternatives: Invest proceeds for a higher return (i.e. make money work for you by providing monthly income), simplify life, relocation
Buyer: “Should I Buy Now or Wait?”
It is natural to be hesitant when the market is in flux, but the best opportunities come when your competition is on the sideline. While others are second guessing themselves, you can take advantage – paralysis by analysis is the saying that will come up more this year. I become more bullish for buyers in this kind of market because we know the market is in a correction category and there is less competition. Acknowledging that a market cycle may swing about twenty percent, arguably we are halfway there if not more and I want to capitalize on it for my clients. This period can last a while, which is why I also advise clients not to buy unless it is the right fit; we spend countless hours understanding the right mix of variables to best fit their situation, so we get it right the first time. Getting the right home for my client not only makes me happy, but my client knows they are in the best property for them during the slower market verses having a sense of regret when buying the wrong kind of property (I hear stories like that all the time).
If you are wondering whether you should buy now or wait, we should work to understand the best fit for you (i.e. compromises, budget, comparables) now, so when you do buy there is no doubt it was the right home. I am not waiting for the perfect time to buy, but rather the perfect property, and I believe if you are honest to yourself and understand the trade-offs, we can get you a perfect property.
Why Consider Buying Today?
Prices are Down: we are off-peak approximately 10% and a market cycle typically experiences +/- 20% decrease, so we are in a correction category
Less Competition: our communities have a chronic supply issue, so competition is usually fierce. Having less demand and more discriminating competition poses an opportunity for you since you won’t be dealing with as much euphoria
Interest Rates: interest rates are hovering around their lowest rate ever, so locking into a historically low rate in addition to a less expensive house than a year ago will put more money in your pocket every month
No one knows exactly what the market will do, but I think looking at history gives a realistic outlook for what to expect. Markets are cyclical and do not go up in perpetuity without having corrections. There is no replacement for proper preparation, whether that means preparing your home to look its best for top dollar or doing your homework to ensure you buy the best property based on your wants and needs. It’s time to reflect on what’s most important for you and put a strategic plan together to make you successful.