Where is the market headed?
Much has been written and pontificated about regarding the real estate market and where it is headed over the last year. Many projected with higher interest rates that home prices would retreat rapidly, and sales volume would tumble.
Others have speculated that the still tight inventory and lack of new home production would keep prices relatively high despite interest rates.
Who has gotten it right so far? Let’s take a look at our local market to try to make sense of the actual results as we compare the year-to-date numbers through November of 2022 versus November of 2021.
First off and still a bit surprising, we find that the median sale price has increased 9.04% year over year despite the higher interest rates buyers are facing. The median sale price for November of 2022 was $450,000 versus 439,900 in November of 2021. The tight inventory argument is probably winning the day as we see prices move even higher despite the significant increase in home mortgage rates.
Conversely, we notice that homes are selling on average in 3.03 months in November of 2022 versus 1.46 months in November of 2021. Generally speaking, three months is considered a fairly balanced market so one could argue, the tables have tipped to Buyers but not by much.
Many others have projected that the number of homes on the market would skyrocket if interest rates doubled which they have. We do find that the number of homes listed has increased from 595 in November of 2021 to 1103 in November of 2022 which is an increase of about 85%. It is worth noting however, 2021 was an extraordinary year in many respects for home sales. To illustrate the point, we look back at 2019, the period before the pandemic and we find that the number of homes listed was about equal to what we find today in 2022.
The higher interest rates have certainly changed the equation but the prognosticators that predicted a market crash seem to have missed the point about inventory supply simply not meeting demand even in a higher interest rate environment.
The inventory of listed homes has stayed relatively constant at around 1,100 homes for the last six months or so. We are not experiencing a dramatic increase in the number of homes listed month over month. In fact, new listings are down from 299 in November of 2022 compared to 340 new listings in November of 2021.
For new homes listed in November of 2022, we find the new list prices are up an average of 14.33% over November of 2021.
The question many folks have on their mind is, do I sell now? Do I buy now? Since prices are still relatively high, it makes sense for a seller to place his or her home on the market today. Prices could drop in 2023 if interest rates continue to rise or we are faced with a recession that slows everything down.
For Buyers, you have better choices today, but you could argue that waiting may result in lower prices down the road. However, if rates continue to rise you could be in a more difficult position. If the economy recovers and rates start coming down, prices will likely increase again rapidly. If you buy today and interest rates come down in the near future, you can always refinance and take advantage of the lower rates. If you can buy, and you find the right home, it seems like a good time to pull the trigger.
Trying to project where the market is headed is a tough call for even the most experienced in the real estate market as evidenced by the many miscalculations by some experts. Homeowners would be well advised to review their personal situation and meet with a qualified advisor to help make that very important decision based on their own circumstances.
Nick Malouff is the CEO and co-owner of Better Homes and Gardens Real Estate BloomTree Realty with offices in Prescott, Prescott Valley, and Cottonwood . To reach Nick or a highly qualified agent, please call 928-925-2023