I get asked a lot how long this crazy market can last. I have a few thoughts that I’d like to share with you about that.
I know it’s been a super frustrating market for buyers. We have several buyers in that position who are losing in multiple offer situations. They’re struggling to find the ebb and flow of this crazy low inventory.
Meanwhile, we have sellers that are super happy with the market. They’re making more money than they ever thought they could make on their houses. The catch is that after closing, sellers have to become buyers as well. Where are they going to go in this market, and what’s causing all this?
Truthfully the state of the market is nothing irregular or especially worrisome. It’s basic supply and demand. I think a lot of my clients have painful memories of the market crash in 2007, and when they see the challenges of today’s market, they think to themselves that this can’t possibly be sustained, so it must crash soon.
“This is not the market of 2007.”
Let me put your mind at ease. This is not the market of 2007. Yes, there’s a frenzy of activity and yes, prices are rising quickly. However, the underlying mechanics of today’s market are completely different from the lead-up to the 2007 crash.
The rate of appreciation that we’re seeing today is largely determined by the buyers and how long they’re willing to pay these prices. At some point they’ll say, “I’m not going to pay that.” Market value is nothing more than what a buyer is willing to pay for a house and what a seller is willing to accept. Markets are cyclical. They go up and down all the time, and they don’t have to have radical changes, like crashes, to correct themselves.
Even though interest rates are historically low, they have crept up a little bit in the past couple of weeks. I think that’ll help temper the market in the months to come, and we’ll see a slight correction. The increase in interest rates will affect some buyers’ ability to purchase or reduce the amount they can purchase. It doesn’t change the jaw-dropping low inventory that we’re experiencing. That’s going to take a little time to fix.
When I say that the market will be tempered over the coming months, I mean we may no longer see 20 offers on one house and excessive amounts over list price.
As we move forward, if you’re curious how this market affects you, whether you’re a seller or a buyer, get in touch with us so we can tell you how we’re helping buyers win homes and how we’re helping sellers sell theirs for top dollar. If you have topics you’d like me to cover in the future, I’d love to hear from you.
