If you consume your news and updates from the national mainstream media, you are likely under the impression that homes are not selling, the market is collapsing, interest rates are spiking, and you’ve lost a lot of the equity in your home. You are likely — and understandably — gripped by fear and uncertainty, and you are not alone. It’s not your fault; the view that the media presents is bleak and frightening. It’s also largely misleading and inaccurate.
What follows below should give you comfort by putting things into perspective and illuminating the truth of the situation, which is that our river of real estate is and will continue to flow and is actually healthier now in many ways than it has been in years.
A Harvard University study found that 13% of the U.S. population (including homeowners and renters) moves every year.
Based on the study, the reasons people move include:
- • Relocation.
- • Relationship change.
- • Retirement.
- • Starting a new chapter in life.
- • Military.
- • Becoming a homeowner.
- • Job change.
- • Marriage.
- • Education.
- • Starting a family.
- • Divorce.
- • Seeking adventure.
- • Upsizing.
- • Financial crisis.
- • Death.
- • Better neighborhood.
- • Better schools.
Many or most of these reasons come up regardless of market conditions. And, in fact, this was born out in the Great Recession, where existing home sales only fell an average of 20% annually.
Let’s take a look at our local real estate market to see how this might play out in 2023. Would you believe that we could expect between 6,400 and more than 8,000 transactions this year? This is how the math works for Boulder County (see chart):
In support of this, consider that LendEDU found that 55% of buyers during the pandemic were not satisfied with their purchase. And if you recall what buying in the pandemic was like, you will understand why. Many buyers put offers in on numerous homes against competing offers before finally getting one under contract. And in order to get that home under contract, they likely had to offer significantly more than the asking price and forgo a property inspection. The silver lining for these unsatisfied buyers is that, nationally, they have an average of more than $300,000 in equity in the home that they settled for.
Taken together, many homeowners are unhappy with their situation, and they have money in their pockets, which sounds like a recipe for future buyers. And this is in addition to all of the other reasons people move every year. Yes, interest rates have increased substantially over a year ago, but at 6%, they are still below historical averages, and it seems like a critical mass of people are deciding to “marry the house and date the rate,” meaning that they are buying now and planning to refinance in a year or two when rates come back down. Anecdotally, we are seeing this play out in our market, with under contract rates increasing, more showings on listings, and even the limited return of multiple offers.
All of this is to say, whether you are thinking of buying or selling, there will likely be a market for you this year — and it will likely be closer to a balanced playing field.
Originally posted by Jay Kalinski the owner of Re/Max of Boulder and Re/Max Elevate.