Real estate is changing. It’s been happening for a while but most people haven’t noticed it. We are in the very early stages of a transition and that’s good.
The housing market is cyclical. There are times when prices go up and times when prices go down. The long term trajectory is always up but moderately. We’ve been up for nearly 10 years now.
We’re still in very positive territory. Demand is strong inventory is low. What’s happened is that pricing has flattened. The law of supply and demand works when there’s value to be had. When cost outstrips value, buyers react and this is where we are.
Up until a year or two ago, affordability was great. While the cost of housing had risen, interest rates were quite low (3-3.5%) keeping homes very affordable. Since then rates are up and rising. Last year at this time rates were at 3.85%; today they’re 4.6% and projected to rise again this fall. As a result, homes are less affordable and this has had a decided effect.
It’s still a tough market for buyers because of continued low inventory. We’re still in a seller’s market. It’s just that things aren’t as robust as they were a while ago. Real estate is changing and that’s good.
It’s a natural process for the market to flatten and even pull back a bit after an extended period of rising prices. Nothing goes up forever and nothing falls forever. What we had 10 years ago was unusual. Severe recessions are not normal and there’s no cause for alarm. So where does this leave you?
Let me repeat – there’s no cause for alarm. This is a healthy and natural process. For buyers, you’re buying a long term investment. Over the course of the 20 or so years you’ll have your home, prices will indeed go up and down. Where you’ll have problems will be with mortgage rates so it’s smarter to buy sooner than later. The cost of your mortgage will affect you more than pricing now and mortgage rates are going up.
For seller’s, keep an eye on your immediate market. Real estate is always extremely local. According to Jeff Otteau (www.otteau.com), half of New Jersey real estate has flattened. That means the other half hasn’t. It may take another few years for the rest to flatten. Meanwhile enjoy your advantage because low inventory doesn’t look like it’s going to end any time soon.
Real estate is changing and that’s a good thing. The market is healthy and will remain so for the foreseeable future. If you want to know about your specific market needs, call or text me at 201-741-8490.