Mid-Year Market Update

Mid-Year Market Update

  • Susan Higgins
  • 06/2/23
As anyone in real estate will tell you, we are in a challenging and rapidly shifting market. Despite the Fed’s best efforts, Buyers are still looking for and buying homes. Although the persistent lack of inventory has left many Buyers frustrated, they remain a determined lot.
 
The rise in interest rates has also led to a return of more cautious buying behavior. Buyers aren’t rushing to submit offers or waiving inspections any longer. Faced with much higher costs to purchase, Buyers are scrutinizing inspections and even cancelling because of them. The “froth” has certainly flattened, for now. But even in these times of fluctuating interest rates, some Buyers still have to move, whether for work or family, or a host of other reasons. And likewise, the market is still moving.
 

After a prolonged lull throughout the fall and into early winter, I have seen an increase in listings over the past couple of months. Activity started picking up in December and has continued to build through the first of the year and into spring. During one week in early March, I received a call every day of the week from a different Seller wanting to meet to discuss selling their home. As a broker, that’s a good thing.

 

Pricing homes in this market has proven to be challenging. No one wants to leave money on the table, (and that includes the listing agent). The challenge is finding the sweet spot between our current market conditions, the Seller’s determination to price as high or higher than a home that sold a year ago, and the difficult lending climate Buyers are increasingly facing. The rise in interest rates and the increased scrutiny on the part of lenders has dramatically reduced buying power for many Buyers. On Kauai, with some Buyers now priced out of the single-family home market, we’ve seen a renewed interest in condominiums, if you can find one.

Our biggest challenge on Kauai remains the lack of inventory in every category, with the exception of the very high-end luxury market. This lack of inventory provides Sellers with the potential to hold firm on pricing, to a point. Even so, Buyers have become more likely to submit offers under asking, hoping to soften the Seller’s position, and requests for repairs are much more common than just six months ago. In short, Buyers have returned to their pre-pandemic process of negotiating on price, repairs, closing dates, and closing costs. Unfortunately, some Sellers are still determined to list their property based on sales from a year ago when everything was so very different.

 

It’s definitely a head-snapper for Sellers, as they pine for last May (the height of the buying frenzy), when the question was how high can we go? There were no worries about comparable sales back then, with Buyers outbidding each other and waiving appraisal contingencies. Still, values haven’t dropped as precipitously on Kauai as was predicted nationwide. Year over year, we’ve seen about a 17% reduction in the median sale price on Kauai, likely due to the higher interest rates Buyers are faced with now. Home values are still well above pre-pandemic values. With more listings coming on the market, values are likely to soften at some point. But we aren’t there yet.

 

The most important advice I can give Sellers, is to price your property based on actual sales data of similar properties. Not on the advice of a neighbor or other trusted advisor. Listen to your agent. Undoubtedly, you chose your agent based on their experience and knowledge of the market. The last thing you want as a Seller is a property that sits on the market with little to no activity. This is a sign to Buyers that something is wrong, whether that be the price or another aspect of the property. Be aware of the “new” Buyer. These are Buyers who are looking for an opportunity and aren’t afraid to come in low, hoping something will stick.

 

As for Buyers, although interest rates are still well above 6%, Sellers have become more open to negotiation. Keep in mind, you can negotiate on more than price to get what you want. Buyers are asking for repairs, and in most cases Sellers are willing. Some Buyers negotiate on the timeline, the contract terms, and even the furnishings. Many Buyers are negotiating down their closing costs or requesting a credit from the Seller to help pay down the points of a lower interest rate.

In conclusion, we are currently in what I referred to years ago as the “mushy middle”. We are transitioning. We are not in a Seller’s market anymore, and we are not yet in a Buyer’s market—at least not on Kauai. In this market, both sides need to make concessions to get what they want. Now more than ever, it’s crucial to align yourself with an experienced agent with deep knowledge of the current market, the connections to get things done and the relationships that bring and keep qualified Buyers in escrow. Please feel free to contact me if you’d like to discuss the market further. I’m always up for a lively conversation.

 

 

 

 

 

 

 

 

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