Market Report: Q2 2023
Opinion: Chris' Thoughts
The national media continues to warn that home prices may be cooling. They warn that high-interest rates are causing a major reduction in mortgage applications. Are these new reports accurate, or are they merely providing a daunting forecast for homeowners and buyers navigating a new reality with low inventory and high mortgage rates?
The local real estate market remains a robust seller's market. We are witnessing higher than usual appreciation in all three counties: New Castle (+4.8%), Chester County (+6%), and Cecil County (12.3%). The low inventory, or the scarcity of homes for sale, is reaching alarmingly low levels. Compared to two years ago, there are now only half as many homes for sale.
We have not observed a decline in prices, despite market indicators over the past few years that would typically be analyzed as signs of a slowing market. My forecast indicates a continuation of an upward trend in prices, albeit at a slower pace. At some point, the Fed will decide to lower interest rates based on reaching their target inflation rate. When interest rates begin to drop, the buyers who are currently sidelined by affordability concerns will flood into the market, increasing demand. Simultaneously, sellers who have been holding on to their current low interest rates from 2020-2022 will feel comfortable making a move. We will witness a booming real estate market when both supply and demand increase as interest rates are reduced.
I had a personal experience this month with a buyer who had their dream home in mind when preparing to buy a home this year. After running the numbers on the cost of their mortgage at the current rates and seeing the available homes within their approved price range, they decided to wait until interest rates go down. Hopefully, that plan will work out for them. Unfortunately, this was also the case for buyers a couple of years ago who felt that prices were rising too quickly but missed out on the 20% increase in home values over those years.
Buying or selling a home is a monumental decision, and it can be challenging to determine the right time. When purchasing your primary home, my advice is to strongly consider your life goals rather than attempting to time the market perfectly. As long as you plan to stay in your home for 5+ years, you will make a sound investment by building equity instead of paying rent. If you are planning to buy a home in the next 18 months, please reach out to me to create a personalized plan tailored to your needs.
Whether you're planning on buying, selling, or both, it is vital to understand the current real estate climate so you can put your best foot forward to get the best house at the best price. Let's dive into the data.