October 15, 2023

Although cooling, the economy remains overheated. The CPI increased 0.4% month over month, 3.7% year over year in September. Core inflation, which excludes volatile food and energy prices, rose 4.1% in September, well above the Fed’s 2% target. The cost of shelter was the single largest contributor to inflation, followed by the price of gasoline. 

The equity markets are bi-furcated with big bank profits and weakness in mega-tech stocks (although if interest rates turn down, that will lift mega-tech stocks). It is a time of economic uncertainty, compounded by the crisis from the horrific geopolitical events in the Middle East.

With the foregoing as a backdrop, on Friday the 10-year Treasury rate was 4.63%, exactly one year ago it was 3.97%. Mortgage rates are closely correlated to the 10-year Treasury. Last year at this time the 30-year, fixed rate mortgage was 6.92%.  Yesterday it was 7.60%.  As I have opined on these pages, rates breaking above 7.5% will dampen housing sentiment.  The worry of sellers and buyers that sales are suppressed creates less sales and softens prices.

In September we experienced a softening in the number of homes sold, list and sold prices. Month over month there were  4.4% less existing single family homes sold. Pending sales, which are a forward looking indicator of sold homes over the next 2-months, dropped 13.4%. Month over month, the average list price was down 5.7%; average sold price down 9.3%; and median sold price, at $487,000, down 6.3%.

So, what does a softening market look like?  Buyers are emboldened.  They are sharp and well educated by their REALTORS® as it should be. They are cancelling contracts, refusing to cave to seller demands.  Buyers are asking for concessions. With rates nearing 8%, if buying you must be careful.  Days on the market is increasing at just under 2 months, and close to 50% of all listings have price reductions.  Sellers who intuit to current market conditions will want the list price of their home to be no greater than 3% above its likely sold price.

Personally, I have had 2 contracts canceled over repairs and/or roofs; refusal to pay appropriate deposits; contingency requests when their existing home was not even listed for sale.  Two months ago, none of this would have occurred.

If you are considering listing your home for sale, when meeting with your REALTOR®, strategize a plan to attract your buyer.  Determine together what you are willing to concede to get to closing. This way you take back control of the process. Prepare to be flexible.