Nov 07, 2023
At the time of writing this article, interest rates are slightly above 8% for a 30 year fixed mortgage. The factors that affect the real estate market extend far beyond just interest rates. However, with rates increasing so drastically over the past year and a half, they provide an easy metric to help understand the current housing market. Below is a simple breakdown of current market trends:
The information above should seem counterintuitive. If there are less buyers in the market and their purchasing power has diminished, why is median sales price up? The answer lies in simple supply and demand economics. Due to the fact that supply of houses on the market is also so low, even with lower numbers of buyers in the market, the demand is still very high. This is especially true in highly desirable markets and tracks with the market in Charleston, SC (where our firm is located).
So, what do these trends mean for buyers and sellers in todays market?
For Buyers: If you have the ability to afford a higher monthly payment for a period of time, hopefully with the option of refinancing in the future, you are competing against less buyers in the market. However, supply is still low and houses are still selling with impressive speed. This requires buyers to be diligent and prepared to move quickly on homes that they are interested in. Do not let this pressure you into overreaching financially, but do remain diligent.
For Sellers: The bottom line is that this is still a sellers market. If you own a desirable home, there will buyer interest at strong prices. However, keep the current market conditions in mind when setting expectations and prices.
Real Estate Auctions Present Opportunities for Both Buyers and Sellers
For Buyers: The beauty of buying real estate at auction lies in the unparalleled transparency. As mentioned above, buyers in todays market must be ready to move quickly. How frustrating is the process of waiting for your offer to be accepted, countered, rejected, or sent to highest and best in a traditional real estate sale? This process takes time and it holds buyers hostage until they have a clear idea of whether they have a chance to buy the home or not. When buying real estate at auction, the buyer has the ability to see what others have bid and what asking bid is required to become the high bidder. This allows buyers to understand where they stand in real time, providing autonomy and peace of mind.
For Sellers: Although there are less potential buyers in the market, there is still strong demand at strong prices for desirable homes. Real estate auctions rely on the effectiveness of controlled competition. We like to say that a successful auction only requires two bidders. A marketing campaign conducted by a reputable firm will attract many more than two bidders, all of whom will be competing against each other for your property. With less inventory on the market, these buyers will be strongly motivated to put their best foot forward.
No one can confidently say what is to come in the real estate market. Although the current market may not seem ideal, auctions present opportunities for both buyers and sellers. For buyers, real estate auctions provide crucial autonomy and transparency. For sellers, auctions are an opportunity to harness the power of competition, particularly driven by current supply/demand conditions, to earn the best price possible for their homes.
(1) NAR Research Update: https://www.nar.realtor/research-and-statistics/research-reports/research-update