| Homes are Staying on the Market Longer, on Average |
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In 2021 and the first few months of 2022, the real estate market was thriving because of the low interest rates and the high competition among buyers. Now that the Federal Reserve has increased interest rates numerous times over the past year, mortgages cost considerably more than before, making it increasingly difficult for buyers to afford a home.
In Los Angeles, CA, homes remained on the market for an average of 65 days in December 2022. During the three months spanning March-May 2022, homes stayed on the market for an average of 46 days. The following takes a more comprehensive look at why homes haven't been selling as quickly.
Why are Homes Staying on the Market Longer?
There are several reasons why homes have been staying on the market longer in many areas. Keep in mind that the real estate market usually slows down in the late fall and winter, which means that it should begin to speed up again in the spring and summer. However, the latest sale trends are more than just seasonality.
High interest rates have many potential sellers opting to remain in their homes. And while home values have risen substantially over the past two years, profit may be less of a motivator for sellers who will also be buyers. This staying-put trend means less inventory on the market.
Those same high interest rates paired with high property values have contributed to many buyers being priced out of the real estate market. Less buyer demand also contributes to lower inventory, as sellers can’t rely on competition to drive purchase prices up.
When fewer homes enter the market, the existing inventory takes up a much larger percentage of total inventory, which means that the average "days on market" will increase as for-sale listings get older. Interest rates will likely remain high throughout 2023, so the current dynamic of less demand and less inventory probably won’t change that much.
What Does it Mean for Buyers and Sellers?
While the real estate market is still favorable for sellers, it's for different reasons than we saw in 2021 and the first half of 2022. At that time, inventory was low while demand was high, resulting in increased home values. While home values haven't dropped much in recent months, less demand from buyers means that sellers might not receive as many offers.
Despite the slowdown across many markets, buyer competition is still high in some areas. Affordable markets are more appealing than ever, which is why metro areas throughout the Midwest remain popular destinations for buyers. In comparison, once-hot Austin is seeing some cooling. In December 2021, houses were on the market for an average of 21 days. That number jumped to a median of 68 days in December of 2022.
If you're looking to purchase a home, the current market conditions aren't optimal. However, homes being on the market for longer means that you won't need to rush your decision. If you are looking to sell your home in the near future, reach out to us and we can design a marketing plan to ensure your property gets noticed. |
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| Common Real Estate Terms, Explained |
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Whether you're thinking of selling or buying a home, there are many real estate terms that you'll likely hear throughout the process. Here’s a breakdown of what they all mean.
 Appraisal: An appraisal is a third-party estimate of what a home is worth. When purchasing a home, lenders require appraisals to ensure they're loaning the right amount. If the appraised value is lower than the buyer's offer, the buyer may need to pay the difference.
Broker: A broker is a professional who has obtained a broker's license and understands construction, property management, and real estate law. Real estate agents are supervised by brokers.
Closing: The closing process is the last step of a real estate transaction. On this date, the property is transferred from the seller to the buyer.
Closing costs: These costs can amount to 2-5% of the home's purchase price. Examples of closing costs include appraisal fees and attorney fees.
Deed: A deed is a contract that transfers the title directly from the seller to the buyer.
Down payment: A down payment is the total amount of cash that the buyer pays at closing. Some home loans have minimum down payments of 3-5%.
Earnest money deposit: This deposit is around 1-2% of the purchase price and is paid by the buyer when the contract is first signed. It's meant to show the seller you are serious about the transaction.
Escrow: This account is made when a third party holds an earnest money check from the buyer until the transaction is completed. Then these funds are sent to the seller.
Home inspection: An inspection is performed by a third party to identify a property's condition during the closing process. Inspectors will include information about the foundation's stability, the condition of a home's roof, and the state of any major home systems in their report.
Interest rate: This is the cost that the buyer pays to their lender to borrow funds over a set period of time. It's displayed as a percentage.
Lender: A lender is an individual or financial institution that's lending money to an individual buyer to purchase property. The loan will then be repaid with a certain amount of interest.
Mortgage: A mortgage represents an agreement between a lender and borrower that allows the lender to obtain the property if the borrower can't make their loan payments on time.
Pre-approval: Before you make an offer to buy a home, you should get pre-approved by a lender. The lender will check your credit history and income, verify all information, and approve you for a specific loan amount.
With these terms and definitions in hand, you should be better prepared to buy or sell a home. If you have questions about any of these terms or want an overview of what the process looks like for your specific situation, reach out anytime. |
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