There is an irregular rhythm to this fall market.
Serious buyers at certain price points are making moves, particularly those seeking homes under $2M. In spite of a relative lack of inventory and recalibrated (i.e. more reasonable) home prices across the board, most buyers are still behaving cautiously. Bidding wars are no longer the norm, although some desirable properties are still receiving multiple bids. Renovated townhouses in prime locations remain in demand.
The Federal Reserve has raised interest rates five times this past year with some of the most aggressive increases since the early 1980s, in an attempt to curb inflation. By making it more expensive to borrow and spend money, their goal is to durably slow consumer spending so that supply outstrips demand and the price of consumer goods is forced to fall; meaning companies who have gotten used to enormous profits these past few years will be forced to compete by lowering the price of their goods, thus producing a slower rate of inflation. This process can take time to play out. Moderate gains have been made in curbing inflation through the recent rate hikes, but it is still quite high as evidenced by the price of gas, used cars, utilities, etc. Thus, there is a strong chance of another rate hike in November.
There is considerable chatter about whether or not we are in a recession or one is looming. A recession is predicated on three factors: unemployment, consumer demand and at least two consecutive quarters of decreasing economic output (i.e. “gross domestic product or GDP”). GDP did decrease for the 1st and 2nd quarter of 2022. However, consumer demand has remained strong and the unemployment rate has fallen to pre-pandemic levels.
Recessions are more common than you may realize. Since WWII there has been a recession in the United States every five years or so, averaging less than a year in duration. For perspective, the Covid-19 recession in early 2020 lasted only two months. Recessions may sound scary but can produce attractive long-term investment opportunities for those who are prepared.
Supply chains are still facing some disruptions, the stock market has been bumpy, and geopolitical turmoil continues to create a sense of general unease, and all of these factors combined impact the way homebuyers and sellers behave.
Nobody wants to time the real estate market poorly, but it is nearly impossible to time the bottom of the market. Our years of expertise in the Brownstone Brooklyn market suggest that if you plan to own a property for 5-7 years, that time frame serves as a buffer against volatility and will allow you to see gains on your investment. Historic rates of appreciation also predict long-term growth. When there is less heated competition from buyers, opportunity exists.
While the media has been emphasizing mortgage rates of nearly 7%, we know lenders in Brooklyn who are offering rates closer to 5% (or less) if you meet certain criteria.
As soon as the Federal Reserve board stops increasing the interest rate, that will herald a more robust market on the horizon. As a buyer, you want to make a move before that happens, while you have far less competition and certain sellers may be negotiable, depending on their circumstances.
The truth is opportunity can be found in any market and real estate is hyper localized, so it can be particularly advantageous these days for buyers to seek out a knowledgeable real estate agent’s expertise and insight on specific properties you’re considering.
For sellers, it’s incredibly important to set a realistic price for your home today. Overpriced properties are facing price adjustments over time and a lingering listing indicates a lack of desirability, which tends to keep buyers at bay unless they’re seeking a bargain. Pricing appropriately up front on the cusp of the market, staging effectively to highlight your home’s best features and mitigating any areas of concern, will help to garner as much interest as possible, as quickly as possible.
As always, we welcome any opportunity to offer you confidential advice and support on your real estate endeavors—contact us today.