Home prices have been seemingly surging for the longest time now to the point that everybody universally agrees that we are still in the middle of a seller’s market due to the appealing mortgage and refinancing rates as well as an increase in buying sentiment amid the global pandemic. In fact, it has even gone so far as to having bidding wars for homes wherein overvaluation becomes a concern and listed properties go sold in a matter of days.
However, circumstances show that the scale might soon tip over to the side of buyers as signs of the real estate market cooling off become apparent, especially considering that the price levels are overdue for corrections and coming back down. And while there’s no guarantee of when and how this market move will occur, we’ll be going over the reasons as to why it will happen and how investors can pivot efficiently.
The Seller’s Market Might’ve Seen Its Peak.
Nothing goes up forever, and everything that rises will eventually fall back down to support levels, as evidenced repeatedly, with cryptocurrencies being the most recent proof we can use as reference. And knowing that this principle will always hold, it’s only natural to expect that home prices won’t be surging upwards until the end of time and is bound to ease in the coming months.
- Buyers Are Priced Out Of Their Budgets: Firstly, due to the relentless nature of home prices endlessly inching upward, many would-be homebuyers are being priced out of their budgets and are no longer considering the idea of purchasing a home right now. And while those willing to pay won’t have to go through the struggle of outbidding the next potential buyer, there will be fewer total people in the market searching for a home.
- Worse Than Expected Existing Home Sales: Secondly, while the most recent existing-home sales report came in at a positive when compared to the previous month’s report, the numbers are worse than expected compared to the forecasts. Therefore, it’s safe to assume that investors and analysts alike were equally expecting the surge to continue, with the numbers saying otherwise and supporting the notion of a correction in sight.
- Reopening Of The Global Economic: Lastly, reopening the global economy isn’t in vain. We observe incremental improvements week after week as vaccination programs continue in full force with health restrictions easing in proportion. And once global supply chains observe the same level of recovery, it won’t be long until current constraints become a thing of the past as shortages are met with supply and prices for all manner of raw materials becomes more accessible and affordable.
Real Estate Investors Must Adapt
Given these signs that the seller’s market will soon cool off, we strongly recommend real estate investors adapt to the expected changes and lock in their profits as soon as possible before it’s too late. Yes, there’s nothing wrong with having some properties still listed, but when the subsequent price correction and drop occur, you will have to accept a lesser price offering for your current properties and miss out on the gains you could’ve reaped now.
- Sell Before The Big Sell-off: While it is true that buyers are being priced out of their budgets, buying sentiment won’t just magically disappear into thin air. The key to selling before the big sell-off in the market as a whole is providing more incentive to purchasing your property, meaning that you should invest more into renovations and marketing the beauty of both location and functionality. For example, adding natural stone veneers from Harristone will make the aesthetics of a property shine brighter than other listings, helping it sell faster and even at a better price than you’d expect.
- Prepare For Future Uncertainty: Apart from capital’s sake and economic reasons, another driving factor behind selling now than later is the fact that there’s no telling what future uncertainty holds. We are still far from escaping the clutches of Covid-19, and with fears of the delta variant causing chaos, one wrong move could plunge us back into stricter lockdowns in the worst-case scenario. Sure, economic confidence and optimism have been on the rise as of late, but it’s better to be safe than sorry, which is why investors are taking the mantle of passive investing and risk aversion.
However, Prices Won’t Come Crashing Down Just Yet
Nevertheless, despite countless evidence of home prices coming down, don’t expect the median to drastically come crashing over a single night. The housing market has been floating, so given enough time, normalization in prices will happen eventually. Therefore, position yourself in the most advantageous position for whatever shift in market movement will occur, be it the next three months or the very next week.