The real estate market is very different from this time last year. There seems to be a lot of sentiment that the market is cooling off across the country. The market is less competitive, with a lot more listings for buyers to choose from. That, combined with both higher interest rates and prices, has cooled demand. While we agree that a slowdown is on the horizon, the real question is why?
Locally, part of it is due to our normal seasonal cycle of a resort market, where activity usually peaks around the end of August. When the kids go back to school, things tend to taper off until the snow flies. The more important factor right now, however, is affordability. Due to a historic lack of inventory coupled with high demand, home prices have steadily increased for the last six years. That lack of affordability continues to drive people to move out of California.
We have had several investor clients in recent months who were looking to purchase properties in our area, but ultimately decided they could get a better return on their investment somewhere else. One bought in Roseville, and two, coincidentally, in Indiana. All three said they just felt prices were too high in the Basin. And with interest rates increasing a full point in the last year, potential buyers may be re-evaluating their ability to buy or invest.
With a reduction in the pool of people willing or able to buy a home, sellers will have to price their properties more competitively and be prepared for them to sit on the market a little longer. But, does any of this mean that home prices will actually start to drop? Probably not, according to the California Association of Realtors. Their forecast calls for home prices statewide to stay mostly flat in 2019, with any decrease likely to be negligible.
As our local resort market is primarily driven by vacation home buyers, many paying cash and unaffected by rising interest rates, we may still see prices continue to increase, though not as sharply as before. Although our crystal ball is in the shop, we do believe this seller’s market is transitioning to one more balanced between buyers and sellers. We also believe that the bottom isn’t falling out of the market. This return to normalcy could mean we’ve seen the last of bidding wars for some time, and that’s a good thing.