Back HomeWhere is this crazy housing market headed?
October 13th, 2022 by keithandkinsey
Some national headlines would lead you to believe that we are in the middle of a real estate crash, while others are still talking about competition among home buyers – so which is it? We are in a tricky weird market right now. Some of the more cyclical markets such as California, Seattle, and parts of Florida have already seen a decline in values. Here in the Madison area, we’ve seen a big calm down in buyer activity, but nothing abnormal from a pricing standpoint. Madison typically has been more of a slow and steady growth market rather than a cyclical market. During the 2007-2012 downturn we only lost 12-15% in house values while other parts of the country lost 50% or more.
Median prices in September were lower than August, but that’s totally normal. Prices in September have been lower than August for the last 10 years, that’s just part of the typical fall slowdown in Wisconsin. The reduced buyer activity this fall has certainly been more dramatic in recent years due to the interest rates doubling over the last 10 months, pricing some buyers out of the market. However, the median price in Dane county is still up 8.6% over September of 2021.
Sales are down significantly over last year though not because homes won’t sell, but because fewer homeowners want to sell. As interest rates continue to rise, more people are choosing to stay put and maybe remodeling or upgrading their current home rather than sell and buy a different home. This is adding to the inventory crunch especially in lower price ranges, but could continue to add to price inflation (even though rates should calm that).
Some homes in Dane County are sitting on the market for much longer and having significant price reductions prior to selling, while other homes are still getting multiple offers. It seems like a buyer’s market and a seller’s market all at once, so what gives? I think some sellers are looking at the comparable sales of properties that closed in June at $50,000 or more above asking price and perhaps getting a little greedy. Some of the homes that closed earlier this year with extreme bidding wars were never really valued (appraised) at what they sold for. So, when you use this as your basis for pricing (or even bump it up higher), you should expect to have a price reduction before your home sells. Other sellers hoped to take advantage of buyer’s buying fixer uppers with no inspection contingencies. Buyers have gotten pickier, and homes that need repairs are seeing reductions too. An appropriately priced home in the under $450,000 price range that is well kept and prepared for sale is still likely to sell quickly close to asking price or potentially even have multiple offers.
There still seems to be strong demand and limited inventory (especially for more affordable homes) and thus we are statistically still in a sellers’ market. While in the higher price ranges you’ll find more inventory available, and the market might feel a little closer to neutral. I hope we are headed for a shift that makes it a little easier for buyers. However, I think tight inventory is going to continue to be an issue.
The bottom line is, the housing market seems to have no real direction (similar to my random ramblings in this blog post). Some factors should be pushing it up while others are dragging it down. It will be interesting to see how things shake out over the next year. There’s been a lot of government influence (or maybe I should call it interference) in the housing market over the years; overstimulating, under stimulating, reacting to quickly or slowly, etc. I think all the Covid stimulus added fuel to the fire in an already hot real estate market. I think the political pressures are making the cycles more extreme by attempting to correct the natural cycles of the economy. Only time will tell, where the market goes from here. If you have a crystal ball let us know, but we’ll continue to analyze on a house by house and week by week basis.
