Happy month of August! Many of you asked about what is going on in our housing market since our July update. We will continue the discussion. August is normally a busy time of year when many families prepare their kids to return to school. As a result, this is also the time of year when the real estate market activity understandably begins to slow down.
This August, we have several other factors at play. Our housing market continues to be in transition from a super-heated one to a calmer one. The market is a reflection of mass psychology. Whenever a market is in transition, there is a lot of uncertainty. This uncertainty leads to hesitation from potential homebuyers. They are no longer willing, or able, to max out their financials. And this hesitation in turn slows market activity.
When the home prices were escalating fast and furious, the predominant driving force for the homebuyers was the fear of missing out. They were afraid that if they did not purchase a home, the prices would continue to rise. Our article from last August contained this sentence “Tearful would-be homebuyers being outbid at every turn”. Now, homes for sale are actually staying on the market longer, the prices stopped rising (with many price reductions), and sellers seem more reasonable at making a deal. This sounds like a great time for buyers to come back into the market. However, economic uncertainty is creating a lot of doubt. According to what we are seeing, the top fear for buyers is if we go into a recession and the home prices go down after they buy. This doubt contributes to an approximately 20% cancellation of existing purchase contracts in Florida since June.
Going back to 2020, we also saw a lot of cancellations at the beginning of the Pandemic. Understandably there was a lot of uncertainty then. After the dust settled, the market reality of supply and demand kicked in. Many people were moving to Florida. There was not enough housing for everyone during this influx. The high demand and low supply resulted in the highest and fastest price rise in memory.
Now, people are still moving in, albeit at a slower rate. We won’t have the data until later, but some are saying that most of the people that wanted to move post-COVID have done so. If that’s true, the post-Pandemic bump is playing out. We should return to a market more similar to pre-COVID. That is, still a Seller’s Market, because the demand still exceeds the supply, but not as crazy as in the last 2 years. Even right now with all the price reductions, they are only being reduced from the record highs of earlier this year, but prices are not lower than a year ago.
We are in the midst of “the dust settling” phase of the post-Pandemic bump. We want to encourage would-be homebuyers and home sellers to stay focused on their personal objectives and forge ahead. History shows that predicting the interest rate and timing the market is a near impossibility.
Buyers that waited for the price to go down in the past were left in the dust. When the prices did stall, they stalled because the interest rates were much higher. This resulted in no advantage for these buyers that waited. The buyers who are still waiting right now, are most likely dealing with escalating rents, which is another reality of our housing shortage. Therefore, if you want to own a home and the current conditions suit you, then buy.
Many would-be home sellers were also hesitant to enter the market, because they were afraid of not being able to buy another home after they sell. With a cooler, calmer market, more people might actually end up selling and buying and achieving their housing goals!
We, as real estate professionals, also do not like crazy markets. We look forward to a more normal market ahead, where logic prevails. And we look forward to helping many of you accomplish your goals. As always, we love to hear from you!