The real estate recession years were tough for me as a Realtor and for many of my clients who truly needed to move for various reasons. From 2006-2014 we watched real estate values fall 20%-60% depending on location. It was heart breaking for many who had done all the right things and, in many cases, paid off their mortgages. Average percentage of home equity can be 40% of your total assets. That is why it is critical for those of you who are planning on selling and waiting for that perfect time. I am speaking to those of you who are thinking a lifestyle change is needed but not sure when is optimum time to make that move.
I understand the emotions involved in making that decision to bring on such a life-changing change such as moving away from the home you have loved to a new address. A decision to move comes when we feel most vulnerable in our lives and confidence in making the right decision may be diminishing. We feel intimidated that “everyone else has figured this moving process out but me!” The process of moving can be overwhelming, and we don’t know where to begin. I believe that many of us could benefit a move closer to our children, purchasing a ranch or condo with no stairs to navigate, or considering a senior community. Our homes in so many cases are too large for our needs and downsizing makes all the sense in the world. But logic and fact may take a second seat to emotion and fear.
Getting back to the ‘great recession’ 2006-2014. Here is what I heard during that period from sellers who waited too long and now had to sell. “I knew prices are falling, but I never thought they could reach these depths”. “I should have sold in 2004-8, but just thought things would keep going up”. “I am so angry that I missed the market and now I am going to pay for that mistake”. “Because I waited too long, I have no choice and will have to take what I can get”.
We are now in a very similar situation. These may be the good old days, when looking back in time as to real estate values. The market today is at a point where we have far more buyers than sellers. That is great news for you who own your home. We are seeing multiple offers and properties selling on average in 7-14 days if priced property. Prices have been increasing since about 2014. That is a four-year run of positive territory as to increasing values in your home. It is impossible to predict how many more years or months this positive value move may continue. One lesson I have learned is that when things do take a turn in the real estate market, the public is the last to know and by then the damage is done. We, as Realtors, knew in 2006 that values were heading down, but the average homeowner didn’t hear about it until 2008. As agents we are on the front line, talking to sellers and buyers and understanding their perspectives. We could see in 2006 that the number of showings decreased, offers were fewer and lower, and we didn’t really know why…it just was.
Today’s buyers have many challenges ahead in the housing market. First, college debt has curtailed the purchasing power of many grads, and the average debt is about $40,000 per student. I had two graduate attorney clients with a debt of over $200,000! Imagine starting out in life with that kind of debt. You can imagine the negative impact of their purchasing power. Second, interest rates will rise as inflation kicks in with an overheated economy. This will shrink the amount they can borrow, meaning they will buy the same house today but pay more in their monthly payments. So, the price they can afford will shrink. Third, with prices rising there will be a tipping point where buyers will pull back and decide to rent instead of buy a home. The fourth factor will be boomers deciding to make their move and downsize. That will increase inventory to a point where sellers will outnumber buyers. More sellers, less buyers equals lower prices or prices to fall. Those four factors may collide at about the same time and cause prices then to fall to a point where buyers will re-enter the market. That process on average may be about a 4-6-year gradual lowering of prices. This will be the next real estate recession.
My prediction is that with so many sellers waiting for that ‘sign’ to make their move, we may see a large supply of inventory coming on to the market and reversing the disproportionate buyer to seller ratio we see today. When that time comes, many sellers, especially boomers and older homeowners will all put their homes on the market at the same time. This will create an oversupply which will start the next downward trend in pricing. When that day comes, we as agents will once again begin to hear, “why didn’t I sell in 2018-19?!!”
If you have questions about selling your home or this article, please feel free to contact us! We are here to help and answer any questions you may have! 262-242-6177