Are you ready? Are you ready for a buyer’s market in our area? Yes it might happen! There are a few factors (which I’ll lay out later) but it very well could happen.
Interest rates: They are climbing. Anyone who has taken econ: 101 understands that the economy is largely controlled by inflation and inflation is combated by interest rates. So as our economy does well we need to control inflation.
The fed has raised the interest rates 3 TIMES in 2018. Not a large amount each time but just enough to get a handle on inflation. As of September the prime rate was at 5.25%. That is up significantly over the last 18 months.
Inventory: While we are seeing higher median prices, the NUMBER of homes sold has been going lower than in previous years. What does this mean? It means that inventory is down. That being said, so are showings. If the trend continues for more than 4 months we will likely see a more balanced market. If the number of months of inventory climbs over 6 months we will head into a buyer’s market for sure.
How do we calculate inventory: Average number of sales over last 6 months divided into current active listings. Let’s take a few examples!
Average number of home sold over last 6 months: 394.3
Active listings: 950
Months of Inventory: 3.2
Average number of home sold over last 6 months: 226.8
Active listings: 631
Months of Inventory: 2.78
Average number of home sold over last 6 months: 212.6
Active listings: 636
Months of Inventory: 2.993.2
Side note: Buyer and Sellers markets are determined by months of inventory (supply vs demand). Under 6 months of inventory is considered a sellers’ market and over 8 month is considered a buyers market. Between 6 and 7.9 months is considered mixed.
Now for what you are probably concerned about: is the market going to drop/shift/die. The answer is unequivocally NO. Here’s why.
Currently we have the largest demographic looking to downsize and purchase smaller homes (Gen X) as well as the second largest demographic (millennial's) looking to purchase their first home. This is what is driving home sales in our area.
We actually have a home shortage right now. This is driving the home prices as well as new construction business.
So for our area, I do expect our market to shift. However the market will shift more to a 2016 market where we experienced a balanced market and good numbers. Something I will take to the bank every day. In the mean time, cash in on the deep seller's market and list as soon as you can. Especially if you have a vacant home or an estate to sell.
-Dylan A. B. Diersen
First Weber, Inc
Dylan has been quoted on by national new outlets and has multiple designations recognized by the National Association of Realtors. Also, he has consistently helped more and more people achieve their real estate goals by increasing service. You can see more blog posts at FoxCitiesProperties.com/blog or keep in touch on Facebook at https://www.facebook.com/WisconsinRealEstateExpert/