Coming Soon: The spring real estate market – Wednesday Journal

The 2023 local real estate market was enough to give the average buyer or seller whiplash. With a low inventory of homes and rapidly climbing interest rates, the market went through several different iterations in a single year.

Interest rates and inventory

For Tabitha Murphy of Berkshire Hathaway Home Services, the 2023 spring and summer market were busy, but there was a big shift in the fall when interest rates rose. “We saw a drastic shift in buyer mentality,” she said. “Many buyers pulled back for a couple months when interest rates spiked close to 8%. Buyers wanted to take back control, and they did, at least for a couple months. Showings seemed to come to a halt, and when buyers did make offers, we saw buyers pull out of almost 30% of contracts.”

Murphy pulled statistics for 2023 and said that overall, three- and four-bedroom single family homes sold for 98% of their original asking prices, but noted that she sees another side to that picture.

“I do believe that while interest rates have not kept buyers out of the market, they have kept homeowners from selling,” Murphy said. “Many people feel ‘stuck’ in their homes. They are sitting on significant equity, but they are going to pay significantly more for a new home both in price and in monthly payment.” 

 “Many homeowners feel that as much as they want to move or feel they need to move, the prices they would be paying for the new house just don’t make financial sense,” she added.

This behavior by homeowners is affecting market conditions. Murphy noted that it is keeping housing inventory low enough so that there aren’t enough homes for people who want to buy. 

 “Our biggest challenge is low numbers of homes on the market,” said Swati Saxena of Baird and Warner.

The problem also has roots in the COVID-19 pandemic. She noted that many homeowners refinanced their homes during the pandemic and locked in low interest rates. People who would have been ready to downsize saw their kids move home or needed room in their homes to work from home, and it no longer made sense to downsize for a larger mortgage payment.

Inventory is also playing a role in condo values. 

 “What has surprised me most is the increase in the condo values in late spring 2023 to the current market,” Murphy said. “There has been such a low volume of condo listings coming on, that many condo owners saw significant increases in their units’ values within a matter of months.”

January is not typically a high-volume sales month, but Murphy said that those homes that do hit the market see a lot of showings and in many cases, multiple offers.

While she’s not seeing homes selling for extreme amounts over asking price yet, she said she imagines that will happen with the spring market if inventory stays low. 

Saxena is hopeful that the inventory problem is easing. She said people who put off upsizing by making do with smaller homes and people who waited to downsize are starting to make the commitment to selling.

“You can only put off life for so long,” she said.

What Does 2024 Hold?

According to Saxena, the spring market arrived early this year. Four of her transactions in recent weeks have all involved multiple offers. 

“We traditionally wait until after the Super Bowl to say the spring market has started, but this year, not so much.”

Murphy agreed that the market is already active.

“We are definitely seeing a high influx of buyer showings on our listings,” she said. “We’re seeing homes selling quickly already and with multiple offers. So far, it doesn’t seem to be as much competition as it was in the early months of 2023, but it may be too early to tell.”

 Both agents said that for people looking to buy or sell in 2024, it pays to be prepared. 

“Our best recommendation for homeowners who need to sell in order to buy, is to figure out a way to be non-contingent on their purchase. In a competitive market, a contingent offer is rarely considered by a home seller,” Murphy said.

She added that if potential buyers can’t work out a way to be non-contingent, they should be willing to sell their home first to maximize their price, move into a rental and to be ready to buy when the right home comes along. 

Saxena said she tells potential buyers to do their homework.

 “Get pre-approved with a trusted lender so you are good to go when something comes up. Be prepared: know what you like and don’t like.”

For buyers in a market like ours, where multiple offers are common, Saxena said it’s not a bad idea for buyers to lower their maximum price so that they have a buffer and can move up their offer in a multiple offer situation.

Saxena said she advises sellers to work closely with their realtor to minimize any issues with the home. She said that spending money upfront to make the home show ready results in fewer concessions down the line.

Murphy said that if things continue as expected, she sees more elevated prices noting, “As much as I want prices to level out for the sake of the real estate market in general, I just don’t see how values will stop rising with the kind of demand that we have. I see this for condos and single-family homes. Condos are much more affordable than single family homes are right now, so that is also driving their price up.”

With interest rates predicted to fall in mid-to-late 2024, Saxena projects that this summer and fall could see more multiple offers and more competition for properties.

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