by Carol Ryniewicz
As a local Broker / Owner of an active Real Estate Company in Connecticut, I am often asked questions regarding the Real Estate housing market. Lately I have been asked repeatedly, "Is the Market going to Crash?" So I thought I would write a short article addressing this question for our area. Since markets around the state and country can be so different, I am going to provide a glimpse into the Northeastern part of Connecticut, specifically Windham County.
For the last 3 years Real Estate prices have dramatically increased. According to Connecticut's Multiple Listing service in Windham county the median sales price of homes has risen 12.5%. That is almost a $100,000 increase in sales prices in just 3 years. See the chart below.
The trend of home prices continues to rise, yet there are still other factors that contribute to the market that will determine whether it will rise or fall. They are inventory, home prices, and mortgage rates. All of these must be evaluated to determine the course for the next year or more. So let's discuss each one briefly.
Inventory levels are still quite low. With a shortage of homes and a high volume of buyers still actively looking we continue to have homes going under deposit quickly. More homes for sale in all price ranges are essential in this current market.
Pricing is the tricky part. Buyers and sellers learn the markets quickly. Therefore, in the past year with home prices rising, we have been in multiple offers with homes selling for way over asking price. In some cases as much as $80,000 over asking price. This has taught buyers that they must be very competitive with their offers by removing contingencies and submitting their highest and best offers to be competitive. The number of cash offers being submitted has been extremely high and has hindered buyers with financing contingencies from being able to compete. However, since the buyers and sellers have now learned this process we are now seeing a change that may start to slow the market a bit. Sellers and agents are seeing what people in their area are getting for homes, so they are pricing the homes at top dollar. Buyers are then looking at the price and then they are not willing to put in an offer way over asking price and therefore the home may sit for a bit while buyers watch to see if it goes under contract quickly. Then if it doesn't they come in with lower bids, resulting in a lower accepted price for the seller. It is very important to price the home correctly for this reason. Pricing at top dollar actually brings in a price lower than if you priced it competitively, which would result in an increase in offers and create a multiple offer scenario.
Mortgage Rates are increasing and though they are rising they are still very good rates. I hear people saying that the rates are still good if you look at the big picture. Looking at rates over the last 30 years, we are at an all time low. In 1982 rates were approximately 16%. Demand continues to be high even with increasing rates and we have little to no rental inventory and this is keeping a high volume of buyers.
Given all these factors it is quite variable and hard to predict what the market will do. We still have a lot of buyers who are looking to buy and a low inventory of homes for sale. This will continue until the supply levels out. Even with interest rates rising, we will continue to see homes selling. Once the inventory levels increase, then the market will start to level out with a more equal number of buyers to sellers. I do not believe this will happen this year but it might for next year. So if you are thinking of selling, this is the year to do it.
Make sure you have a good agent who knows the market. Ask them and make sure they explain their strategy. Speak to a few agents to find the best fit for you and the one with the highest price for your home won't necessarily be the best one for you.