We’ve all seen it coming…well, now it is here. We’ve all heard that what goes up, must come down. Plus, I see it happening before my very eyes right here in the Deland area and throughout the western edge of my primary area in Mount Dora. However, what evidence suggests a market slowdown actually exists? Below are 7 signs that the market is actually slowing as originally reported by the Florida Realtors Association.
- Increased days on market: The buying market is becoming less competitive and this lack of demand causes homes to sit on the market for just a bit longer.
- Price cuts: Because of #1 above, sellers are motivated to reduce their prices. Less instances of multiple offers and offers being made early in the process provide angst to sellers, especially when paired with the media hype of increased interest rates, the falling skies, etc.
- Lower absorption rates: This metric measures the rate at which available homes are sold in a specific area in a given time frame. This is impacted by supply and demand: more homes on the market means less demand and homes taking longer to sell.
- Decreased home value growth: As demand decreases and homes sit on the market, sellers end up accepting lower prices for their homes. Lower home prices equal lower home values.
- Higher inventory levels: See #3 above. A clear sign of a slow real estate market. Many sellers held off in the fall, avoiding the holiday selling season. Unfortunately for them, many other sellers did the same thing, leading to fattened inventories in the new year. When these higher inventory levels are coupled with higher interest rates, the market slows. I encouraged all of my sellers in the fall to avoid this trap…some did and some did not.
- New construction: New construction continues to boom; however, new homes are now taking longer to sell. More new homes suggests more competition to resales.
- Slowed investor activity: New investors gained confidence in 2008 and maintained that throughout the last 10 years; however, we are seeing less investor activity. Increased investor activity is usually indicative of a strong market and we simply aren’t seeing that in today’s market.
Is the sky falling? No. Is it a bad time to buy? Not necessarily. It is usually a good time to buy or sell when YOUR circumstances indicate that YOU need to do so. However, being aware of the current market conditions will help save your hard-earned dollars when you buy or sell. If you are selling, be realistic and don’t overprice. Failure to adhere to this basic will likely end up leaving you with a lower net value of your sale. If you are buying, be mindful that there is less competition for the sellers, and you may have more leverage than you’ve had in recent years.