Hi all, the fact that I am home writing instead of showing property today just strengthens my opinion that the market is slowing– finally! We have been at a non-stop sprint since the spring 2012, and it’s nice to feel the market drop down to…normal. Inventories are up, and price negotiation is possible.
What’s causing this? The drop off seemed to me rather abrupt this year, like someone pulled the emergency brake on a train. Here’s a couple of thoughts of why that might be:
- It’s the time of year. Conventional wisdom is that real estate traditionally gets a little slower at this time of year. Kids are in school, and the holidays are right around the corner. Notably, this did not occur last year, where last winter saw a huge run-up in prices due to non-existent inventories.
- The government shutdown. People don’t like uncertainty, and some buyers may be taking a wait-and-see attitude. Then there’s a fact that some government workers are just not being paid. Fortunately, I think our local area is not as directly affected by federal cuts as other areas of the country.
- Interest rates are up. There was a significant rate increase in the early summer this year– interest rates went from the mid-3% to mid-4% range on news from the Fed that they were considering discontinuing “quantitative easing.” This caused potential buyers’ payments to rise enough that they couldn’t afford to complete their purchases. So if you could afford a $600k house in May, you could only afford a $550k house in August. Deals in my office fell out immediately over affordability issues, but strangely, people re-adjusted and climbed right back on the bandwagon. In September, the Fed said nothing about phasing out QE, and interest rates went down again. But it didn’t seem to spur the buyer to buy, as I would have expected.
- Football season. And maybe the Dodgers being in the playoffs. I held open houses at one of my listings the past couple weekends, and because of the great price, I expected to be absolutely overrun. I got good turnouts, but not what I expected. Even the streets seemed empty!
What do you think?