This is a good segue to discuss demand. The desire for home ownership continues to be fundamentally strong. I believe this is for at least a couple reasons:
1.
The natural consequence of large numbers of rental investors listing their portfolios for sale (point #1 above) is that the renters who were displaced are now in need of another place to live. This puts further burden on the shrinking rental capacity and drives rental prices up. Higher rental prices = more buyers wanting to own instead, and the cycle continues… One of the societal changes that has driven the real estate boom of the last three years has been that the millennial generation is ready to buy their first homes. This demand has not been fully met yet, which is one factor exerting upward pressure on prices. Many of these buyers have had difficulty winning bids due to their financing type, the need for seller concessions and/or fierce competition with other buyers, especially in the price range of most first-time home buyers. This can be seen in significantly lower average days on market for properties in the $150,000 - $250,000 range.
2.
However, these buyers are starting to get more access to the current inventory. One indication is the increase in the number of sales that inlcuded seller concessions through 2022. By 4th quarter, the market was back up to about 30% of sales inlcuding some amount of seller concession.
This is good news for buyers as they start to feel a little more leverage in the market after two years of a strong seller’s market.
3. Interest Rates…what conversation about real estate these days cannot at least mention interest rates. The sharp increase in rates over the year, certainly had a chilling effect on demand. But as that stabilized and pulled back into the lower-6% range, buyers appear to be s shopping again.
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