Published October 11, 2023
Unpacking the Current Real Estate Market: Is a Slowdown Looming?
The big question: Will we see a slowdown in the real estate market?
If you're a prospective homebuyer or seller, you've likely wondered about the current state of the real estate market. Is it going to slow down anytime soon? It's a question we hear often, and in this article, we'll delve into the factors influencing the market and discuss what the future might hold:
1. Supply and demand dynamics. Buyers are interested in the market's future because they anticipate more favorable conditions with a slowdown. Sellers, on the other hand, want to know when they can expect the peak of the market. The reality of the situation hinges on the dynamics of supply and demand.
When supply is limited, but demand remains strong, prices tend to rise. This fundamental economic principle applies to the housing market as well. However, a unique aspect of the real estate market is that the number of new homes being built significantly impacts the available inventory.
"Is the market going to slow down soon?"
2. The role of new home construction. Ideally, we need approximately one million new homes constructed each year to maintain a balanced market that meets the needs of both buyers and sellers. Unfortunately, over the last three years, the average number of newly constructed homes has been around 700,000 annually–notably less than the desired one million.
This shortage of new construction places extra pressure on existing homeowners to list their properties for sale. However, the recent trend indicates that people are moving less and fewer homes are being placed on the market, particularly since the onset of the COVID-19 pandemic. Various factors contribute to this, further reducing available inventory.
3. Current market conditions. Despite the news and prevailing interest rates, we're still grappling with an inadequate supply of homes. This imbalance has created a seller's market, and it's unlikely to change in the near future.
While the market is not as red-hot as it was in 2021, or even 2022, prices continue to rise due to the ongoing supply-demand gap. Despite the occasional interest rate increases, affordability for buyers remains favorable.
Is the market going to slow down soon? Probably not. While it may not be as frenzied as it was in recent years, it's still very much a seller's market. As a buyer, the market offers a great opportunity to purchase property, and as a seller, there's never a bad time to put a valuable piece of real estate on the market. If you have any questions, don’t hesitate to reach out by phone or email.
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