Is the NoMi Real Estate Market Cooling Off? Well Yes, but also No.

Every day we receive a new newsletter from someone in a real estate related business telling us the sky is falling, the market has reached its peak and is headed for its decline. Often we just giggle and get back to work helping many of our sellers navigate the multiple offers they just received on their home. Yes, we are still seeing competitive, over asking price situations despite increased interest rates, inflation and a looming recession. However, that’s not the case for all clients, as certain segments of the market are more impacted by the changing economic environment than others. Let’s break it down.

What segments are still hot?

The under $350,000 home buyer market and the higher-end unique home market.

The first one is obvious. People need a place to call home. A warm bed and a roof over their head. This price point makes the homeowner’s monthly mortgage payment similar to most rentals rates, and why not build a little equity versus paying rent? Add to that the influx of jobs and people to our area and we don’t see this segment changing anytime soon. Yes, most of these buyers are interest rate sensitive borrowers, however a homeowners paid interest rates in the teens during the 80s peek inflation because they knew it wouldn’t last forever and they could refinance when rates drop. While higher interest rates may have lowered the amount of house buyers can afford slightly it has not been enough to put a damper on still strong demand.

The luxury market is also still thriving. While buyers in this segment are more impacted by changes to their balance sheets as a result of stock market declines, they have to put their money somewhere and most understand that this too shall pass, as it always does through economic cycles. Real estate is about as hard an asset as you can get outside of the fine metals (re: gold) and a great way to diversify your portfolio which means these buyers not only are willing and able to buy a beautiful home of their own, they are also looking for investment opportunities in the aforementioned under $350k market.

The segment that’s getting the squeeze are homes in the $400k to $1MM sales point. These middle to upper middle-class homes don’t often check enough boxes for the would-be luxury owner and payments are often out of reach for first time home buyers and a vast majority of hard-working people. It’s too early in the shift to prove it yet with significant data, but we are seeing homes in this space stay on the market a little longer. We even are experiencing a phenomenon we haven’t seen since well before the pandemic. Are you ready for it? Price drops!

But make no mistake- we are not gloom and dooming any segment. Middle priced homes are still being sold for above what they were two years ago and at a reasonable clip. Realtors are just having to work a little harder for it and should also be having honest and quick pricing discussions with clients on these homes to react to market signals quickly and keep buyer interest high.

We believe Chicken Little is just doing what he always does, trying to scare people into reading his news story over a more balanced economic perspective. This market is wildly different than 2008 and we all knew the wild ride had to end sometime.

We believe what we are seeing now is simply the beginning of a return to a more normal market where people are buying and selling based on where they want to live. They are becoming ever so slightly more able to do so from a decent sized inventory of homes that are no longer flying off the shelves. Inventory is starting to build as increased rates moderate,  but don’t eliminate, demand. We believe we are on our way to those good-ole-days of old when you didn’t have to promise your first born to go under contract on a home, and realtors could actually put their phone down for 3 and a half minutes and not worry that the perfect home for their loyal buyer is going to come and go during that span of time.

Regardless of where you fall in this spectrum, we would love to share more of our thoughts with you on your current market and help you through your own unique buying or selling (or both) situation. Give us a call or send us an email today to set up a consultation. Be sure to follow us on social media to stay up to date on current market trends.