Sellers market vs. a home buyers strike
Jan Stapleton - 2023 NETAR President
If the market wasn’t confusing enough, there’s new jargon elbowing into the space normally reserved for is it a buyers’ or a sellers’ market. Consumers’ fear of missing out is being muted by the fear of buying at the top of the market. The buzz is about a buyers’ strike and what will spark an impasse.
We’re past the jolt of seeing mortgage rates jump from 3% to 7%. They’ve settled into the historical 6% range. There’s no question that has boosted the monthly mortgage payment. And since most home buying decisions come down to the monthly payment, it means a buyer’s expectation reset. They’re internalizing that they may have to settle for less house and are reluctant to buy. This is fertile ground for the buyers’ strike because the wisdom of the media crowd is that prices are poised for a big drop.
Locally prices have softened, but not by much. Since the market’s peak in August, the sales price average growth rate declined by 1% per month. But that’s a short-term trend with a healthy dose of seasonal activity. It doesn’t detract from the fact that the annual average was almost 16% higher than the previous year. The last time there was a local annual price decrease (down 1.7%) was in 2012, when the market was at the bottom of the Great Recession. And there have only been three annual decreases in the last two decades.
Still, headlines about prices plummeting in major metro markets are complicating consumer beliefs. Although the national news is not always representative of the local market, it’s what consumers internalize. That’s where the power of partnering with and listening to a local Realtor© comes into play. They work with local – not national – prices and sales patterns. It’s where local market reality bumps up against headline perceptions.
So, what will soften consumers’ reluctance to buy? Simple, it’s the perception of getting a deal.
One reason the market is so frothy is the economic landscape is so indecisive it’s impossible to set a course. Monthly and year-over-year reports point to improvements in the inflation situation. But those improvements are a little like the local inventory. It’s moving at a snail’s pace.
It’s pretty much a given that there will be a couple more interest rate increases this year. Economists think the FED will lower them to the half or quarter percent range. The effect will take some time because it takes a while for those rates to filter into the economy and even more time for the data to catch up.
Meanwhile, local market wild cards that will have a more immediate and almost as much impact are buyers who have a different mortgage rate sensitivity than the typical local buyer. They include relocation buyers, wealth buyers – there are a lot of them who made hefty equity gains during the last three years – and owners who don’t have a mortgage. There were a little over 77,000 Tri-Cities area owners with no mortgage. They account for a little over 50% of the region’s housing.
Early reports show foot traffic is up for both the new and existing home markets. Potential buyers are seeing what’s on the ground. They’re researching what’s available and trying to get a handle on what deals are available. There’s no doubt that 2023 will be a year of change for sure, but whether those changes will be
transformational is a question mark. Given current conditions and assuming that new residents continue heading to the Tri-Cities at the current pace, the transformations should be minimal.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us