For a few years after the Great Recession that peaked between 2008 and 2010, real estate markets were ideal for those looking to score a deal on property. The housing bubble that had been growing since the early 2000s finally popped, causing a historic reduction in the price of real estate. In the spring of 2007, The Washington Post reported that housing prices had seen their most dramatic drop since January of 1989.
Since then, the market has slowly been recovering thanks to a decrease in available inventory and the growth of the job market in the United States. The buyer’s market of 2008 and 2009 is long gone. Several reports and projections show that home prices are higher than they have been in recent years for a few reasons.
Low Interest Rates Driving Up Demand
Over the past few years, interest rates on mortgages have been at historically low levels. However, when looking at the trend of annual interest rates through a narrower lens, it becomes clear that they are going up. In 2013,CBS News said that at the end of June of that year, rates went up almost half of a percent, representing the largest week-over-week jump in interest rates in over 25 years.
Home sellers know that home buyers are feeling pressure from reports like this, because they want to capitalize on low interest rates while they still can. As a result, sellers are able to exert more control over real estate transactions and are more likely to get a price close to what they are asking for.
Tight Inventory Gives Sellers Leverage
Another reason the buyer’s market is long gone is because of low inventory levels, a situation which is forcing buyers to make competitive offers on homes if they want a realistic shot of making the purchase. Multiple offers are a reality in many markets and buyers are often missing out on their top choice because they still think they have an advantage. As an agent, it is hard to get buyers to believe the reality when they keep hearing national news reports saying the housing market is still weak. Education is the key, but sometimes it won’t matter and they will have to learn the lesson the hard way.
How The Disappearance Of The Buyer’s Market Impacts Realtors
Because the buyer’s market is long gone, real estate agents trying to sell their listings are in a better position than they were five years ago. Increased demand means an increase in prices, which provides realtors with more income thanks to improved commissions from fewer days on market and lower marketing costs, which leads to larger profits.
However, if the rise in prices continues, it could spell trouble once again for real estate agents. Many buyers will be priced out of the market if home prices keep going up, which could lead to the creation of another bubble. It might be true that the buyer’s market is long gone, but agents should still start preparing for a slowdown in home prices as new construction and an increased amount of listings eases some of the pressure that home buyers are feeling in the current housing market and rising interest rates impact buying power.