Housing Market Silver Lining

Recently the media has offered up plenty of gloom and doom predictions and scenarios concerning the current state and future of the housing market. There are numerous graphs, statistics and headlines that present hard evidence of a dramatically slowing and changing housing market specifically, existing home inventory, decreased sales and lower home values and subsequently prices. As we enter a new year, the glory days of the pandemic housing market frenzy are a thing of the past. This is not bad for everyone though and there may be a silver lining that could help ease the pain of the higher interest rates in the long run.

It’s a buyers market/ The buyer now no longer has to overbid by unrealistic sums

In response to a looming recession and drastic inflation, “The Feds” implemented their tried and true method of drastically hiking interest rates which in turn caused mortgage rates to double in a matter of months. This along with increased financial vetting by the banks and mortgage companies made it even more difficult to borrow. Sellers decided to stay put as they realized they would have to also face the higher rates and inflated home prices which had jumped up an average of 45% in two years. This has created a change in inventory and suddenly the dynamic of the real estate market has changed from a sellers market to a buyers market meaning there is less competition and urgency and the buyer no longer has to offer over the asking price.

Properties on the market today are in better condition

Enticing buyers with low mortgage rates created a market frenzy and made it almost exclusively a sellers market. The climate allowed homeowners to unload their homes in record time and often without lifting a finger or spending a dime to repair or prepare the home before it went on the market. This meant that a high percentage of the homes on the market were rundown or in need of repairs and the unfortunate buyers who were somehow hoodwinked into the risky act of waiving the home inspection found themselves moving into a home that required unforeseen expenses and extensive repairs to make the home safe and habitable. After moving in many had to procure a home equity line or dip further into savings accounts to fix the mess they were faced with. They also were faced with the aggravation of having to find a contractor or tradespeople and suffering through living in a construction zone. Many found themselves in homes that were difficult or expensive to maintain or that had problems that a 2 1/2 hour home inspection surely would have illuminated. Generally speaking the homes on the market today that we inspect are nicer, safer, cleaner, fresher and an all-around better product for the buyer which was not the case in the frenzied market. We are seeing more pre-list inspection requests which help the sellers figure out what repairs and replacements they need to prepare the home for the sale. So although the interest rates are higher, the buyer has better choices and ultimately doesn’t have the complications and expenses incurred by blindly buying a rundown property, in short, they have a better product to choose from. Buyers no longer have to make outrageous promises such as waiving the home inspection

Because it’s a buyers market the buyer can slow down and be more discerning ultimately making an informed decision. Here are two good examples that I witnessed first-hand. I was recently asked to inspect a large 4500 s/f home recently in Chesapeake, Virginia. My client assured me the home was in great condition because it looked great during the initial walk-through. During the inspection, several hidden defects were discovered which my client would never have seen or known about until moving in. These defects included an outdated, inoperable HVAC system, a 20-year-old water heater that was beginning to leak and needed to be replaced, a plumbing leak under the house with pooling, standing water, a roof leak, shingle damage and soffit and fascia damage. The buyer was able to negotiate for repairs with the seller which saved time, money and aggravation. Another example was an inspection in a Virginia Beach duplex. The seller had owned the property for a long time but had not maintained it. To the buyer, the property appeared to be a sound investment with great rental income. During the home inspection, we found a toilet with a leaking valve that had rotted the floor and a corroded, leaking cast-iron sewer pipe that flushed raw sewage into the crawlspace creating a wet, unhealthy environment.

The point is, imagine moving into or purchasing one of these properties and discovering these deficiencies once you closed. In this new market, as homes sit on the market longer and the rates continue to climb, the buyer is now more careful and discerning and expects a nicer product for their hard-earned cash. In turn, because homes in any condition are no longer selling in one day, the sellers are having to present a desirable product. Otherwise, the homes are starting to sit as better ones come up. This really makes it a better transaction for all involved including the real estate agents. These positives I believe will in the long run help relieve the pain of higher mortgage rates. If you are a buyer or seller in the Hampton Roads area or surrounding areas, call Summit Home Inspections today for a thorough inspection by a licensed, insured, experienced home inspector.

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