As the 2023 market opens, home sellers face a daunting challenge. It’s not a physical one, but a rather simple mental one; acknowledge the current housing market. Best advice as to what home sellers should expect in spring of 2023...understand that it's not the spring of 2022.
The single most important thing sellers must do is accurately price their home. The market conditions now (end of Jan 23) bear no resemblance to the market conditions a year ago. The current market is largely balanced with a slight edge to sellers. However, that is not universal, some micro markets are balanced and some areas/price points lean to buyers. As with everything real estate, each micro market often varies.
Interest Rates Jump
The most critical and obvious change are interest rates. As the chart below illustrates, in the span of a year, rates on both the 15 and 30 year fixed more than doubled. This eliminated interest rate sensitive buyers and altered options for most others. This altered the “food chain” and the impact is felt at most price points.
In terms of sheer numbers, this chart is telling. We see listing inventory drop early in the pandemic, buyers stall then recover fueled by rates. Inventory doesn’t jump and we see Mar 21 through May 22 as that crazy period. Just as fast, the Fed crushes rates and we see sellers rush to catch a wave that is gone. As 2022 closed, we see the gap between listings and solds grow and the move to balance return.
Move to Balance
Months of inventory broadly indicates who the market favors. 0-3 months tends to favor sellers, 3-6 is balanced and over 6 favors buyers. Early 2020, pre-pandemic, was shaping up to be a nice boring market; then everything went off the rails. The hard shift back to neutral started in May and is clearly seen.
Days to Sell
The greater Atlanta real estate market is very strong, it didn’t zoom and it won’t crash. The move to balance, however, will see the return of more normal marketing times. Certain homes will remain highly sought after, but 30 to 60 days on the market is average for accurately priced and presented homes. Some will push 90 days and we may see up to 120 days. The market is back to that and spring 2023 will likely stay in this range. Overall, most homes around the greater Atlanta market sell very close to list, the chart illustrates the crazy over list run seen in 2022. That is not likely to be repeated.
Everyone was well aware of the chaos in the real estate market over the last two years, sellers were only too happy to let buyers bid and compete for their home. This chart illustrates the dance between list and sale price, the lunacy peaked in about May of 2022 and prices are coming down off those unrealistic highs. Home prices are impacted by a myriad of things not real estate related; we expect prices to settle but not crash.
Which Means Wise Sellers...
- Work with experienced agents. Plainly stated, agents with less than three years of full time experience simply do not have the base of knowledge required. Listing agents did little more than post homes in the MLS and wait for the offers. Buyer agents did little more than write contingency free offers as instructed. That is not the 2023 market on either side.
- Accurately price the home. Task the agent to review and explain the data, present a marketing plan that adjusts to changes as they come. Overpriced homes will sit, will develop a stigma and will be noted by buyers, appraisers and underwriters. "Why did this home take so long to sell"?
- Present it well. Task the listing agent to determine the most likely buyer and ensure that the home appeals to them, that it is in the best condition possible and that it is marketed where the buyers are. Professional photos, staging, captivating narrative and similar things need to capture attention.
The Atlanta real estate market is not going to crash. Prices will settle but the area did not artificially inflate; the fundamentals in this area are strong and will remain so. Homes will sell, but those selling for the most will be accurately priced and well presented and managed by professional agents. The time for hobby and hack agents done.Posted by Hank Miller on