The real estate market, much like any other industry, experiences periods of fluctuations and shifts. Recent years have seen unprecedented changes, making many wonder if the real estate market will ever normalize. For us to get closer to our answer, we need to look at current market trends, as well as key factors.
To assess whether the real estate market will normalize, it's crucial to comprehend the current trends and factors affecting it:
1. Low Inventory: Almost every market across the country has been grappling with low housing inventory, leading to driven up prices and a highly competitive environment for most buyers.
2. Rising Mortgage Rates: With rates tripling in the last 2 years, a lot of sellers don’t want to let go of their sub 3% interest rates. Higher interest rates reduce buying power, therefore pricing many buyers out of their desired markets.
3. Remote Work: With the major shift toward remote work, many individuals and their families have reconsidered their living arrangements, sometimes even switching states. This led to an increase in “more house, more land.” However, many companies are now demanding at least 4 days back in the office, which may force some people to move back towards more urban areas.
4. Urban Flight: Some urban areas have experienced a decrease in demand, as buyers seek less populated regions, and more green space. This has caused some property values in certain cities to decline.
5. Investors: Between companies like Blackrock, and JP Morgan, and cash investors all over the nation, real estate investors have changed the market. Add to this the rise of Airbnb, all of which has lead to increased competition for properties and affecting their pricing. It will be interesting to see how certain cities and states move forward in restricting Airbnb’s or investor purchases.
While it's challenging to predict exactly when and if the real estate market will normalize, here are some key factors and trends that provide insight:
1. Market Cycles: In many years prior to the real estate rally over the last 3 years, real estate market follow a cyclical pattern including periods of increase and decrease. Typically, fall markets slow down, prices decrease, and days on market increase.
2. Housing Supply: Although new construction is still below the 14 year average, new construction permits continue to be pulled daily. We see construction trucks driving all over each neighborhood, which will increase to the housing supply.
3. Economic Indicators: With many predictions around the economic market, employment rates and inflation, the real estate market will typically correlate to the broader economic trends.
So as a buyer or seller, how do you navigate the current market?
1. Be Patient: If you're a buyer, be patient and well-prepared (aka pre-approved and no home sale contingency if possible). It may take time to find the right property at the right price.
2. Research: Stay informed about market conditions in your target area. Knowledge of local trends can help you make informed decisions.
3. Be Ready for a Mortgage: Secure your finances by getting pre-approved for a mortgage. This can give you a competitive advantage when making offers. Make moves now to increase your credit score, or your income, to give you the best chance to get your home quickly and easily!
4. The Right Real Estate Professional: Work with a knowledgeable real estate agent from Loncar Realty who can provide valuable insights and guidance.
5. Have a Long-Term Perspective: Consider your real estate investment as a long-term venture rather than a short-term speculation.
The question of whether the real estate market will ever normalize doesn't have a simple answer. It's a dynamic landscape influenced by a multitude of factors as you can see above. While market normalization may occur in the future, it's essential to adapt to the current environment and make informed decisions. At Loncar Realty, we can help guide you based on the decision that you need to make for you and/or your family. Call us today for a consultation, and next steps for you. We look forward to helping you buy or sell your home!
Loncar Realty, Hinsdale Real Estate Agents