According to a survey in The Wall Street Journal, recession fears are surging. This survey stated three-quarters of global CEOs say that we are in a recession or will be in the next 12 to 18 months. So what does this mean for the real estate market? Historically, during a recessionary period, interest rates go up at the beginning of the recession but in order to come out of recession, interest rates are lowered to stimulate the economy moving forward.
This chart shows the most recent past recessions going back to the early 80s and there’s one thing that every one of these recessions has in common. It’s that in each instance, mortgage rates fell and in many cases they continued falling after the fact, as it takes some time to turn things around, even when the recession is technically over.
So yes, interest rates are following their historical pattern and rising but could fall again if, or when, we enter a recession.
Where Is the Market Heading
For our second topic we are going to address where is the market heading?
Offers Received.
We’re seeing that number decline. It peaked around an average of 5.5 offers in April and now we’re seeing about 4.2 was the latest number released in June. 4.2 offers per home sold is still far above a pre-pandemic norm. So definitely still a competitive market, but we’re seeing a little bit of that softening or that moderation.
Offers Over Asking Price.
A month ago, 61% of offers were over asking price, and that number has softened now to 55%. Now that’s still more than half of offers over asking. So certainly a softening or a moderation, but definitely not a huge decline.
Sales.
Sales are also softening as well. Rate of sales have returned to pre-pandemic levels after two years of record breaking levels.
Inventory.
Inventory is the biggest factor right now. There has been a pickup in inventory but it’s not from a big increase in new listings, but rather a slowdown in the pace of sales. Same inventory, fewer sales, means more month supply.
According to Mark Fleming, the chief economist from First American
We should start to see less competition, fewer bidding wars and, therefore, less upward price pressure. In fact, a simple analysis shows that a one-month increase in the months’ supply results in a 3% decline in annualized house price growth. And our preliminary house price index is already showing moderation in house prices in April.
So what we’re seeing is, with a softening in demand, more new listings, slower pace and sales, more inventory is available. And when there’s more inventory available, that tug between buyer demand and supply lessens. We will continue seeing prices increase due to low supply but not at the alarming rate we have been seeing.
So What's Ahead?
Experts don’t believe the market is in a bubble or a crash is in the cards, like during the Great Recession. The nation is still suffering from a housing shortage that has reached crisis proportions at a time when many millennials are reaching the age when they start to consider home ownership. That’s likely to keep prices high because millennials are working through the peak home buying years. We know they are the second largest generation behind the baby boomers, just behind them just a little bit.
So What Does This Mean For Buyers
Sales are slowing and there are more active listings available than recent months. Average days of market are also increasing and the average sales price is decrease. This is good news for buyers but with interest rates rising, you cannot afford to wait any longer or you could get priced out of the market.
So What Does This Mean For Sellers?
To the sellers out there the market has begun slowing and we have reached the peak. If, you are thinking of selling now is the time.
Whether you are looking to buy or sell, First Coast Realty would welcome the opportunity to earn your business. Feel free to reach out to us on Facebook or Twitter and we would be happy to assist you in getting the ball rolling. Or, to talk to a qualified, experienced agent call/text today 904-494-8408 or email info@firstcoastrealtyinc.com