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Don’t worry: The housing market isn’t collapsing. Rather, it’s simply returning to pre-pandemic levels — in other words, things are basically getting back to normal, says Carolyn Gagnon, a New York City-based real estate agent.
“The housing market is not anywhere near a crash and is expected to increase in the coming years, especially when this current feeling of uncertainty — due to increased gas prices, high inflation, rising interest rates, and the Ukrainian war — subsides after this ‘wait and see’ moment,” she says.
Still, whether you’re buying or selling (or both!), it can be helpful to know which metrics to keep an eye on as you prepare for a potential transaction. These are a few to watch — and what they’re telling us right now — according to real estate experts.
During the height of the pandemic, homes were getting tons and tons of offers, including many that were well above the asking price and some that were all cash. There were simply too many buyers and not enough homes to go around.
Now, however, the number of offers is trending downward. In July 2021, homes were getting an average of 4.5 offers. Now, in July 2022, they’re getting 2.8 offers, according to the latest data from the National Association of Realtors.
“Sellers should expect to have fewer showings at their properties and fewer bids from their showings,” says Ian Katz, a real estate broker in New York City.
Ask any buyer about their experience trying to get into a house during the last two years and they’ll likely tell you how fast they had to make their decision to put in an offer. Homes were going on and off the market so fast that buyers often didn’t even get a chance to go see them — they just had to wait to pounce on the next listing.
Though buyers are still moving quickly, there’s evidence that the pace is slowing down a bit. In July 2021, 89 percent of properties sold in less than one month. Today, that figure is 82 percent, per NAR.
“Inventory is rising, with properties taking longer to sell,” says real estate agent Kimberly Jay. “This is really a return to a normal market, but it feels worse as sellers became accustomed to selling in a week above their asking price.”
A home’s list price has always been just a suggestion, with buyers deciding for themselves whether to lowball the sellers or offer more money to improve their chances of winning the house. But during the pandemic, that description really rang true: In July 2021, 50 percent of homes sold above the list price.
In July 2022, however, just 39 percent of homes went over asking, according to NAR’s data, suggesting that there’s overall less competition for houses right now. For sellers, this means thinking very, very carefully about the price they decide to list their home at and “treading carefully when considering comps from three to six months ago,” says Katz.
When all goes exactly according to plan, a house that goes under contract will eventually get sold — and officially change hands from the seller to the buyer — within about a month or two.
But when something unexpected happens, like a buyer’s financing falls through or a big problem comes up during the inspection or the appraisal, deals can fall through. These canceled or terminated contracts can be a signal that the market is cooling off a bit.
According to Redfin, 14.9 percent of home-purchase agreements in June 2022 ultimately got canceled, which is up from 11.2 percent in June 2021.
Interest rates greatly affect the number of people who can afford to buy a house at any given time. Low rates make it more affordable to buy a house, so more people are out house hunting. If you’re a buyer, this means you’ll face more competition from other buyers. And if you’re a seller, this means you could benefit from bidding wars.
But on the flip side, higher rates make it more expensive to buy a house, leading to a lower number of buyers searching for homes.
“For homebuyers who have lost out on homes in the last two years due to steep competition, but can afford a higher mortgage payment, this could be the opportunity to revisit the buying market,” she says.