As the market changes, opportunities arise

The only true constant is change. 

The real estate market is not immune to this reality, and it looks as if a new one is on the horizon. 

Despite all the talk of a recession, economists aren’t yet worried about a serious one starting this year. Some believe 2023 could paint a more dour financial picture.

But that gives us time. If the Fed can get inflation under its thumb, we won’t have much to worry about this summer. Except for gas prices. That’s a global thing. 

In the end, inflation is the issue, and apparently, the only way to knock it off the tracks is to considerably raise interest rates. Of course, it would help, too, if Putin backed off Ukraine, but that’s tragically unlikely. 

Houses become more expensive to own as interest rates climb; however, they often become cheaper to buy. Higher rates equate to fewer buyers, which means sellers have to work harder to attract them. That tends to translate into lower prices. 

In a Yahoo Finance report, David L. Steinbach, global chief investment officer of Hines, a $90-billion real estate investor, said as much. 

“Higher inflation is without a doubt making its way into private real estate,” he said. “The bidding pools are becoming thinner.

None of this is instant, of course; it all takes time to filter down from Washington and Wall Street to eventually, Main Street. But when it does, if you’ve remained on the side waiting for your chance to shop, know that you’re closer now than you were merely a couple of months ago. 

Those shallow bidding pools means it’ll be easier for qualified buyers to move back into the depths of the market. Yes, your interest rate will be higher, but 6 percent remains a very respectable price for money. And since earning a return in real estate is about time, not timing, you should be ready to move when the right home comes along. 

Fewer buyers also means sellers can’t be as demanding. Inspections, for example, and offers with financing contingencies, will once again become the norm. 

Builders will be able to make headway into the glut of new construction that’s been largely behind the recent surge in pricing. New construction homes will also put pressure on the existing stock, further affecting prices. 

There are a lot of buyers out there with hefty bank accounts, as evidenced by the frequency of cash offers over the last two years. If you’re one of them, then a lower priced home will only make that down payment money more powerful, alleviating add-on expenses such as private mortgage insurance and possibly enabling a buy-down of interest rates. 

It’s going to take time for prices to drop. Supply remains nationally low despite the uptick in construction, and the recent spikes were the result of natural economic conditions, meaning there’s no bubble to suddenly burst. 

To the best of my knowledge, I’d say things are going to finally normalize. We won’t see 80 offers on a single listing or $100,000 offers above list. Buyers will have time to tour homes, talk to mortgage brokers and make sound decisions out from the under the pressure synonymous with the last two years. 

Sounds good to us. 

If you want to chat about the market, see some homes, find a mortgage professional or learn about life in our market, email me at [email protected] to arrange a time to talk.

The Allison Ziefert Real Estate Group is a top producing real estate team based at Compass in Short Hills, NJ. We are local market experts, specializing in real estate and homes in Maplewood, South Orange, Millburn/Short Hills, Montclair, West Orange, NJ and the surrounding towns. We are driven by earning great testimonials and referral business from happy clients. You can read our testimonials here.