Today I may see the highest number of folks unsubscribe from my weekly eLetter. That’s because homeowners at this phase of the real estate market are in denial. And being in denial is a costly mistake.
You see, the real estate market changed about 60 days ago. That’s when mortgage rates began inflicting pain in buyers’ wallets – and it has gotten worse with rates hovering near 6%. And that’s when inflation began acting like sandpaper on people’s skin.
That’s also when you saw inventory rising faster in this real estate market than imagined. As you can see the graph below, the national number of new housing inventory is up over 107k units in May. That’s an increase of over 30% almost overnight. And in Delray Beach our inventory is up 22% last month from a year ago, and up over 50% from the start of this year.
Knowing this data, homeowners don’t want to hear it. They still “believe” the real estate market is red hot. They’re stuck in the frenzy mindset of 2021 and how there’d be multiple offers all above list price and dozens of people showing up for open houses.
This mindset is expensive and costly. More inventory creates downward pressure on home prices. If a home seller prices their property as it was in February or March, the real estate market will know it’s priced wrong. Their listing will linger for weeks, or now, months. Sellers will scream that their home is not being shown enough. Then they will drop the price by 2-5%. Then drop another 2-5%. By then it’s too late. Home sellers must price their property based on where the real estate market is going, like 30-60 days from now – not where it’s been. Sellers need to get ahead of the market and give buyers a compelling opportunity, now.
If you’re a homeowner thinking about selling, it’s important you implement this strategy so you’re not stuck, so you’re not watching your home price – and equity – drop week after week. It’s only a painful process when you’re in the denial phase. Don’t let yourself succumb to this by thinking forward… and not behind.
I’ve seen this too many times in my real estate career. Each real estate market cycle is different. But the one common thing is how humans act and react to real estate market conditions. We let it get in our own way. And that goes for both bull real estate markets and bearish one, too.
Back in the early 90s when real estate markets were left for dead after the Home Saving & Loan debacle hit, folks were too scared to jump in when prices were down in fear of it not coming back. Again, denial. Then in the mid-2006 era, people believed the real estate market would never stop rising and making folks rich. Again, denial.
And now we have the pandemic market that credit one of the biggest bull real estate market situations ever. In late 2021 new folks in the real estate market never saw a down market and again, were in denial that it wouldn’t stop.
Each of these times the general sentiment of people was looking at what happened, in the past, and not paying attention to what would happen in the future. After all, the real estate market is a cyclical market. It goes up for about 7 years, then it comes down. That’s about a 14 years trough to peak – and visa versa.
In the end, we continue to get in our own way by denying things WILL change for the better or worse. We get stuck in out thinking and clog our perspectives. But one small tweak can help you win in any real estate market… that tweak is paying attention to where things are going, and not where they’ve been.
This essay goes into small detail about how extremes never last. It’s a good place to get your mind right and back into reality.
