As I write this, it is just after Labor Day 2022. Normally, that would signal seasonal changes that Americans have come to expect. Labor Day usually heralds thoughts of summer ending and there not being any other holidays until Thanksgiving.
This year the messages seem a bit more muddled than “normal.”
Our local weather hasn’t been normal in some time with wildfires popping up more and more
each year and temperatures breaking previous records. Things have gotten so strained that power companies issue almost daily warnings to please cut back on power usage to help conserve energy.
Our neighbors to the west are warned of potential “rolling brownouts” as supply threatens to fall short of demand.
Labor Day once signaled the arrival of cooler temperatures. This year that does not seem to be the case.
I could go on and on talking discussing topics such as our election cycle, economic projections, international unrest, and other daily crises, but let’s leave that to others.
Here, we will focus on my favorite topic – real estate.
The monthly numbers
from the Reno-Sparks Association of Realtors came out earlier this month. As many of us in this ever-changing business have been forecasting, the market has shifted.
What has been a long-standing solid market, popularly deemed a “seller’s market,” is finally showing signs of leveling out. Now, it could be argued that this is “normal.” Meaning that markets change and this is something that could have been anticipated.
To me, there is much more to the story.
Real estate has always had a cyclical nature to it. Usually, these were periods of increasing prices and demands followed by slowdowns often caused by external economic pressures. Some of these pressures have included costs of materials, land values, and a common denominator of interest rate changes.
During the most recent upturn in our market, fuel has been in increasing demand, short supply of homes for sale, and most importantly, record low-interest rates. If you have been paying attention, this is nothing new.
It seems that suddenly the shift I and others have been warning about has come to fruition.
So what happened?
The biggest factor that has caused our “shift” is our old friend — interest rates.
We have all been enjoying a decade-long growth spurt of price appreciation in residential and commercial real estate. The chief beneficiaries, of course, are those who have owned or who have been able to obtain ownership of real property. Even though property values have skyrocketed, low-interest rates have enabled many to become homeowners.
That is changing.
Non-cash buyers, who, a year ago, could qualify for home ownership because their mortgage rate would be under 3%, now may qualify for significantly less because of interest rates hovering at or above 6%. A year ago, non-cash buyers that were often outbid by cash offers now find that they might not be able to afford the house that they really want. This is in spite of the fact that inventories on the market across all price points are increasing.
Let’s talk specifics.
If I am in the market to buy, there are things I can do to help my cause. I have said this before, but it bears repeating.
First, I can make sure that I have myself qualified to the limit that I can afford. That means finding a lender (preferably a lender local to the market I wish to purchase in) that will not just issue a pre-qualification letter but one that will take me through underwriting for a pre-approval letter.
Second, I need to find a real estate agent I am comfortable working with and who I trust will put my best interests over theirs.
How about if I want to sell a home?
The market has changed from what it was even three months ago. Prices have not been rising at the breakneck pace that they have for the last few years. There is more competition and buyers need not be as impulsive as they once might have been. Once again, please find a good realtor. Listen to what this person has to say about getting the home ready for sale.
Clean up the home to put its best foot forward. Get rid of excess clutter. Repair things you know might be wrong. Elbow grease and paint are very affordable and can lead to a faster and quicker sale.
Above all else, please listen to your agents’ thoughts about price. Putting a home on the market overpriced sets one up for frustration. Hitting the pricing sweet spot right out of the gate is imperative. Especially now.
We still have a very good market in Northern Nevada. We still have a shortage of homes and my greatest fear is that new home builders will cut back on production as they usually do when markets adjust. Jobs are still coming at a solid pace. Builders, please keep building.
Above all, remember that this is one of the best places on earth to live. Nothing will change that.
As always, feel free to contact me. I am at your service.Gary MacDonald is a real estate coach, the immediate past president of the Reno-Sparks Association of Realtors, and a Realtor with Dickson Realty.