Market Shift Provides a Window of Opportunity for Buyers
Traditionally, September is a time of falling buyer demand and increased seller urgency! I call it clearance month in real estate! Over the years, we’ve noticed a window of opportunity for Ann Arbor homebuyers in the fall. And now, with rising interest rates pulling less motivated buyers out of the market and increasing inventory, this is a perfect time to find a perfect home, have more bargaining power and maybe have 1 or two “Plan B” options too.
Many buyers have given up on their home searches. Get in while there are fewer people in the market!
Pandemic Shifted The Housing Market
Because of the COVID-19 recession, interest rates moved to record lows and people found their housing needs had shifted. Many realized they could work remotely from a cheaper city, closer to family, or in a more desirable location for their family. Houses in the Ann Arbor area were selling for prices significantly more than their listing prices – and they were selling quickly in a rushed and frenzied market. Homes were selling for well over list price as low inventory, low-interest rates and highly motivated buyers took advantage of this market. Additionally, stimulus checks and high savings rates allowed for greater spending power.
Back to the Pre-Pandemic Housing Market
Let’s look at today’s market by comparing it to pre-pandemic numbers.
The graph above represents showing activity from January 2017 through May 2022. Showing activity is a good indicator of buyer demand, as more showings mean more buyer interest.
The gray portion of the graph represents pre-pandemic years. We see the typical, consistent seasonality of the housing market here.
In comparison, from 2020 to early 2022, buyer demand was abnormally high during the pandemic. The number of showings skyrocketed as people rushed to purchase homes at low-interest rates. As we move past the pandemic, we are likely to see showing activity fall back to pre-pandemic levels. Add in higher interest rates and the effects high inflation has on home ownership costs and we are expecting showing activity to fall.
What does this mean for buyers?
These shifts are not bad news for Ann Arbor home buyers and home sellers this fall. Expect more homes on the market (more options), houses on the market longer, and less frenzied buying. Yes, rising interest rates require you to adjust your home purchasing budget but there are positive aspects, too.
Rising Inventory: More Opportunity for Home Buyers
The graph above shows that there are more houses going up for sale (light green) than going under contract (dark green). This is because of a decrease in buyer demand as rates head toward pre-pandemic numbers. This trend will likely continue through the fall, creating an opportunity for buyers. Buyers can be more selective with more options and more bargaining power. If a house is on the market in September, the seller is likely motivated to sell and maybe not by choice.
Houses Will Stay On The Market Longer
Rising mortgage rates will also slow down how quickly homes sell. During the pandemic years, homes were not on the market for very long because rates were so low that buyers rushed to finalize their offers to lock in fantastic mortgage rates. We essentially had a “sale” on mortgage rates and people sensed this sale would end soon! Contrasting, mortgage rates are likely still moving higher, but we are past the super sale, now buyers are purchasing in an environment where affordability is on the brink of forcing them to lower their price points and be much more judicious about a purchase decision. While it’s still a seller’s market, the playing field is leveling out.
Buyers, Enjoy This Window Of Opportunity
All of this means that buyers are facing a new opportunity in the housing market. If your list of “musts” on a home hasn’t been met by the pandemic market, your time may be now. The bottom line, the market is still strong, heading back toward historical averages of the price increases. Buyers, enjoy this opportunity of increased inventory and time to shop. If you’re buying for the right reasons, then now is the right time to buy. Get in while there are fewer buyers and less competition in the market!