The Detroit Post
Sunday, 05 December, 2021

Are Real Estate Sales Slowing Down

Maria Garcia
• Monday, 07 December, 2020
• 7 min read

“When a real estate market slows, it takes longer and longer to sell a home,” explains Barbara Dope, whose team ranks as one of the top 10 in production out of over 4,000 agents in the Boise, Idaho area. Even experts who watch the markets for a living have a hard time reading the real estate tea leaves.



Let’s dig deeper into each one of these factors and how to tell if conditions at any one time are showing evidence of a slowdown. Walk into any retail store and you’ll find two very distinct sections: new arrivals and clearance.

All the flashy “just in” and “new release” signs attract the big spenders willing to pay full price to have what’s exciting and new, now. The clearance section attracts the bargain hunters, who’ll ask for deeper discounts on already marked- down products that most buyers considered too defective, outdated, or uninteresting to pay full price.

This same shoppers’ mentality holds true in the real estate world where a home’s “new arrival” or “clearance” status is determined by days on market. Source: (FRED)Historically, home prices do drop or “correct” from time to time, they rarely take any lasting toll on the expected appreciation of home values.

If home values have been skyrocketing fast for an extended period, they’ll eventually hit a wall and start to fall. When they can no longer afford to purchase even the most modest starter home, buyers simply stop house hunting.

When rising interest rates reduce the purchase power of buyers, it prices them out of the market. So when mortgage interest rates begin to rise with no sign of falling, you can expect that will domino into a market slowdown.

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Source: (Peter Heeling/ Skitter photo) People always need a place to live, so houses will continue to sell no matter what if the market is warming up or cooling off. “There are three things will affect a home selling: location, condition, and price,” advises Dope.

“There’s nothing you can do about your location, but a home that is in great condition for the right price will sell even if the market shifts.” So, the first and most important tip is simple: Don’t assume you know more than your real estate agent just because you follow national housing trends.

When you’re selling in a seller’s market, where there're tons of buyers and little competition, you can list your home in almost any as-is condition and expect to get pretty close to top dollar for your property. But when sellers are all vying to attract the same few buyers during a market slowdown, listing your home as-is can cost you.

However, even with that expert advice, some sellers still insist on listing at the highest possible price “just to see” if they can get an offer that high. Then you’re chasing the market, and you’re going to sell for less than if you would’ve priced it right in the beginning,” advises Dope.

But in addition to a substantial increase in the number of home listings with price reductions, we found other potentially game-changing signs of market adjustments, including a surge in the amount of inventory for sale and the number of days on the market. Metros seeing the biggest slowdowns”There's a rebalancing that needs to happen,” says Len Kaiser, deputy chief economist at Freddie Mac.

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“Prices have risen so high in some of these markets that it's very tough from an affordability perspective . To come up with our rankings of the real estate markets that are slowing down the most, we looked at annual price, inventory, days on market, and price reduction changes from October 2017 to 2018 in our realtor.come listings in the 100 largest metros.

That seemingly small 0.91% increase made mortgage payments $127 a month more expensive on median-priced homes of $295,000. It adds extra payments totaling $45,540 over the life of a 30-year fixed-rate mortgage, assuming that the buyers put 20% down.

With less competition come fewer bidding wars, and more inventory that isn't being snatched up within an hour of the “For Sale” sign going up in the front yard. Borrowers are facing a little “sticker shock,” says Julie Aragon, a mortgage broker at Julie Aragon Lending Team in Santa Monica, CA, who works with buyers from San Diego, No.

Even an eighth to a quarter of a percentage point increase is going to make a big impact.” That's particularly true in high-priced areas like the Southern California city of San Diego, where the median price of $659,400 is more than double the national figure.

Higher rates are also stymieing move-up buyers who want to trade their starter homes for larger, nicer homes, but are reluctant to give up their existing low mortgage rates to do so, says Ted Wilson of Residential Strategies, a housing consultant based in the Dallas area. “Folks have been used to a world of dirt-cheap mortgage rates,” says Freddie Mac's Kaiser.

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“We’re moving to a world where rates are more in line with what we’d expect to see over the long term.” “To some degree, the markets that went up the most and the fastest just pushed too hard ,” says Patrick Carlisle, chief market analyst for Silicon Valley and the Bay Area at the real estate company Compass.

So is it any big surprise that about 36.8% of San Jose-area sellers have had to slash prices on their homes in the last year? President Donald Trump's tax changes have also hit Silicon Valley and the Bay Area hard.

The entire West Coast, long the growth capital of the United States, is showing signs of being overheated. “For everyone, there's a maximum to what they can pay,” says Annie Deck, senior manager at John Burns RealEst ate Consulting, who covers Seattle and Portland.

More and more homeowners, fearing that the real estate market has reached its peak, are champing at the bit to sell. “There’s a perception that the market has had a good run and maybe it’s time to cash in,” says Honolulu broker Krishna.

In Stockton, CA, which came in first in our slowdown rankings, price drops are common because sellers shot too high, says local agent Jerry Patterson of Cornerstone RealEst ate Group. But with more homes for sale and less competition for them, “buyers are now in a bit more of a power position,” Patterson says.

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