The market has been in such an overheated condition this year that any headline of a “market slowdown” is almost inherently misleading. Yes, the market is slowing. But it is a good sign, not a bad one. The market shift actually began in March, and now is confirmed. In addition to the shift, the market is following our typical seasonal pattern; slowing in the back half of the year once the spring buying season is over. Last year the pandemic extended the buying season as people could not flee the valley for vacations. This year we expect, as in years past, activity to gradually slow through the end of the year.
It is important to understand that the market balance in favor of sellers has been and continues to be driven by the levels of supply. Yes as prices rise, demand drops. But it is the increased supply – both in unsold properties and in the form of new listings that is driving this rebalancing market. We are in the early stages of the rebalance.
Sellers are going to need to adapt to a market that is shifting. You likely will not see the carloads of showings, multiple offers and spiraling pricing as desperate buyers fight to outbid each other. You will see more properties not selling if improperly priced for their condition. That does not mean homes are no longer selling or that prices are plunging. But seller expectations do need to adapt. Michael Orr of the Cromford Report comments on this issue: “The number of active listings is increasing by roughly 300 per week. The number of showings is in decline and the number of contracts getting signed is getting smaller as each week goes by.
All this makes sense. When prices leap by over 35%, demand is suppressed and supply stimulated.
The obvious question is how far this trend will go before it levels out. The honest answer is that no-one knows. Buyers are more cautious now than they were in 2005. Sellers’ normal first reaction will be denial. Some will blame their agent. These sellers will probably be complaining that they are not getting the viewings and offers their house deserves. This is because they have so quickly become accustomed to a frenzied market. They will now need to get re-adjusted. The market still favors sellers, but buyers will start to gain a little more respect.”