Real estate is based on relationships. Every sale represents a consumer’s choice between financial decisions, quality of life and being ready for what is next in their lives.

When the real estate market is transitioning from one stage to another, for example going from a buyer’s market to a seller’s market, it feels strange and unbalanced. People wonder what is happening and why some people see their houses sell quickly with multiple offers, while others just sit there without much interest and excitement. This is the market we are currently in.

According to data presented by Lawrence Yun, Chief Economist of the National Association of Realtors, late last month, inventory of existing homes is at the lowest it has been in the last 25 years (see table below). There was just 1.5 months of supply at the end of 2023, well below the 3 to 6 months of supply that has typically been used to characterize a balanced market, especially pre-pandemic.

While sales volume is low, home values are holding strong and still on an upward trajectory. Therefore, the fundamental strength of the market underscores that once consumer mindset shifts, we will be yet again in a strong sellers’ market, which already feels right around the corner.

In our area Home Price Appreciation since Covid has been extremely positive. Average home values increased by 15.6% in DC, by 35.5% in Maryland, and by 42% in Virginia (see graph below).

The Pent-Up Seller

The term Pent-Up Seller is used for those sellers that have held themselves captive in the last 2 years and chose not to make a real estate move given market conditions.  They have been hesitant to let go of a low interest rate mortgage to engage in a higher interest rate one.  They are also concerned that because inventory is low, they won’t be able to find a house they like.

However, after two years, they are ready to move on with their lives. They need bigger/smaller houses, they need more/less space, the current location doesn’t serve their daily lives and dreams anymore.  For the past two years that our sellers have been in hibernation mode, life continues to go on.  In an average 2-year time-span in the US, we normally see:

  • 7 million new-born babies
  • 2 million marriages
  • 1.5 million divorces
  • 7 million people turning 65 years old
  • 4 million deaths
  • 4 million net new jobs
  • 50 million job switches

As we head into the spring market with interest rates that have stabilized in the last 3 months, our sellers are ready to move on.  Therefore, we are expecting a healthy influx of properties hitting the marker as soon as early March!

 

The Hesitant Buyer

Buyers that got paralyzed when the interest rates increased are still in the market.  However, they just present themselves as “not” being ready to buy right now.  In my experience, we know that if the right house comes along, they will in fact buy it.  They have been watching, they have been saving, and they are ready.  They are just hesitant to put themselves out there because they are exhausted from opinions and influences.

Fear and uncertainty, rather than fluctuating interest rates, have been the biggest influencers of buyers’ behavior when it comes to real estate.  Uncertainty has hindered their decision to take action.

 

Real Estate Agents Bridge the Gap

Us, as real estate professionals [Maybe start: As real estate professionals, we interpret…] interpret data, clarify public information, and act as a sounding board to help our clients make decisions.  We study and interpret the market for our clients, the same way a financial analyst studies and interprets financial markets, and an attorney studies and interprets laws for their clients.   By studying the market [and] analyzing current market realities, we provide clients with our own insights.  We can restore confidence in their decision process and create an actionable plan that will meet their immediate and long-term needs.  Who you are in business with matters!

We encourage clients to reach out to real estate agents to have a conversation about our outlook of what is coming up.  I personally encourage agents to reach out to past clients and prospective customers to clarify market data and explain what we are seeing in the market.  We win by working together!