To tell this story, we have to go back to 2008. After the great recession, we entered an unprecedented market flooded with houses that could not sell. We had what we call a "buyer's market," where we had few buyers and a lot of houses for sale. This tends to drive prices down. The demand wasn't there. As many Americans watched their retirement account fade, they became much more conservative regarding spending. As a result, the demand for new houses plummeted, so we saw fewer new houses being built.
It wasn't until the late 2010s, when Americans finally felt more confident in spending, that we swung to a strong seller's market, where we had a lot of buyers but little inventory. This started the rise in average home prices the high demand caused prices to climb. At the same time, interest rates had become increasingly friendly, causing a massive uptick in refinances.
By the time the lockdowns started to lift, we had sawed rock bottom, record setting low interest rates. Historically low inventory continued to drive prices up. On top of that, as Americans we locked down, their savings accounts went up. People canceled their travel and party plans and put all that money in the bank.
To summarize, we have incredibly high buyer demand versus very little inventory. We have low interest rates. Americans have more money now than ever, and high prices aren't scaring them away.
How does it get better? The short answer is INVENTORY. Housing prices should stabilize if the building of new homes meets the increase in demand from available buyers.
Because inventory has been so low, we have seen an increase in the number of offers per house. According to Zillow's Consumer Housing Report, nearly 25% of homes for sale saw at least four offers. I listed a house in early 2022 that saw 16 offers and had 52 showings in 3 days! Now, more than ever, being able to put in a strategic offer is vital to winning in these multiple offer situations.
As a buyer, you will have many contingencies (things that need to happen to your or your lender's satisfaction before you proceed with the sale of the home inspection and appraisal are examples of this) as part of your offer to the seller. While price does speak pretty loudly, the terms you offer your seller may also play a big role in getting your offer accepted. For example, let's say that someone lists their house but also needs time to find a new place to live. They may ask 30 60 days past closing to occupy the home while they find and move to their new home. This seller may choose an offer from someone willing to give them 60 days to move over someone who may have a higher price but will want keys at closing.
An experienced agent can help advise you on the best position yourself in any offer situation. We cannot guarantee that an offer will get accepted, but we can help get you in a position to win. This may include an agent talking to you and your lender to help get strategic with the funds available as down payment and closing costs, doing as is inspections, or offering the seller time after closing to move, among other things. This should be done with the client's best interest in mind, ensuring that the client will fully understand what their offer includes.
We recently saw a massive jump in the number of real estate agents. From 2020 to 2021, NAR saw its membership grow by over 156,000. The market has been flooded with new agents, lenders, and partners; all are trying to capitalize on the flurry of activity we've seen since 2020. Market conditions have created one of the most challenging cycles in US history.
More than ever, people are looking at professionalism in real estate agents. They want to know that the person guiding them has the right training, education, and experience to help them navigate this challenging market. It is important as a consumer to interview agents before agreeing to work with one of them.
Many agents will have offices where you can set up meetings to discuss their strategies and get a feel for their market knowledge, and they'll be happy to show it off to you! Get recommendations, research profiles online, and interview do your due diligence to find the best fit for your needs.
