by Anna Varnell
on Monday, July 25th, 2022 at 4:30pm.
In the recent months, the real estate market has begun to shift. What does that mean for you as a buyer? Should you wait for rates to go back down? Should you wait for house prices to drop? Here is what we are seeing in this market shift and why it is a good time to buy.
1. Housing prices are starting to balance
You may have noticed some homes sitting on the market longer than 48 hours or sellers are dropping their prices in order to sell. This does not mean that the value of the home is decreasing. It means that we have reached the peak of this crazy, rapidly climbing market. Over the past few years, housing prices have increased faster than we've ever seen before. House values were increasing tens of thousands of dollars if not more in just a year. While real estate will appreciate, it has never happened that quickly. The appreciation that we've seen over the last few years normally takes much longer than just a year or two.
What we are currently seeing is while the market is still competitive, there aren't as many offers that are excessively over asking price. Now don't get me wrong, it is still competitive out there and every home and price point will have a different experience. The market is simply starting to balance out. Balance is a good thing coming out of this heavy seller's market for both sellers and buyers.
For buyers, it means you have more negotiation power and don't have to offer everything you own just to win a bid. As a seller, this is not a bad thing either. Many people have been hesitant to sell their home for fear of not having enough time to find a new home to move into. In a more balanced market, you may not receive offers $40k above asking price, but you can still sell your home for a great value and also feel less anxiety about finding a home to buy.
2. House prices will continue to increase
Even though the days of houses going for $50,000 above asking price are gone, house prices will still rise just at a much slower or at a "normal" rate. Now, you might be thinking, why is this a good thing as a buyer? Because it means you're still building equity by appreciation. Merriam-Webster defines equity as "the money value of a property or of an interest in a property in excess of claims or liens against it." Simply put, it is the difference in how much your home is worth and how much you owe on your mortgage. Appreciation means the value has increased over time. If house prices are not increasing, you aren't building as much equity.
For example, let's say you purchased your first house in 2017 for $250,000. Now you are ready to purchase a bigger home because you get to work from home or your family is growing. There are many factors that go into what your house would be worth and we always recommend consulting with a real estate professional. For this example, let's say your home is now worth $350,000. If you have priced your home correctly and you sell your home for $350,000, that means in 5 years you made $100,000 just by simply owning the house. While appreciation will vary, building equity is important regardless of when you purchase or how much you purchase your home for.
3. More Inventory to chose from
Recently, the federal reserve raised interest rates. Rates have been historically low which meant more people were able to afford to buy a house. While there are still a lot of buyers and competition, the increase in interest rates changed many people's buying ability. You may also hear a lot of people talk about how they're waiting for house prices to go down. As mentioned before, house prices will continue to rise just at a slower rate. What all of this means is that you most likely won't be up against 15-20 other buyers all competing for one house as has been the case recently. While you may be up against a few other buyers, inventory has also increased 31.6% just in the last month in the Greater Chattanooga Area which means more opportunities for you as a buyer.