After a wild and unprecedented pace of real estate sales over the past two years, there are a lot of questions bouncing around about what’s new and next in the Lowcountry real estate market.
Well, from the “front line” of the marketplace where buyers, sellers, agent and properties come together, this is what we are seeing as the three main factors that are shaping the “new” marketplace:
First, interest rates. For anyone who has been around long enough, you’ll recall when interest rates were in the high-teens. This perspective makes a 6% rate look like a dream, and a 3% rate sound like a unicorn. But…at the start of 2022, buyers (and refinancers) were gobbling up those unicorn rates, and they are still boasting about them today. Then, inside of the first 3 months of 2022, rates doubled to around 6% (still incredibly low!), and they have been bouncing around that level for the past 6 months, with projections of possible increases yet this year.
These higher interest rates are creating challenges in two specific ways: affordability and the fear of letting go. Of course, affordability goes down as rates go up, as has always been the case, and that is exacerbated by the rise in property values we have seen over the past two years. This combination limits the number of buyers who can afford to buy property in our area at this time with the current rates. But they are not alone, as many would-be-sellers are feeling anchored by their current low-interest-rate mortgages. They would love to sell and make a nice profit, but they are afraid of stepping out of, say, a 3% loan only to face having to get a 6% loan upon their next purchase. As such, a log-jam ensues…
Second, inventory is a game of mixed messages right now. ACTIVE inventory, which represents the total number of properties available on the market at any one time, has been CLIMBING all year. This is great for buyers who want more choices; however, one of the reasons that ACTIVE inventory is climbing has to do with unrealistic pricing and/or undesirable condition. In short, savvy buyers are hesitant to “overpay” in this market, and few of them are up for taking on an update/renovation project. As such, more properties are sitting on the market longer, and price reductions now seem to be back in play. Meanwhile, NEW inventory, which represents properties as they initially enter onto the market, is DOWN over the past several months. When these properties hit the market, they are either absorbed quickly (and in some cases still with multiple offers), or they have to patiently wait for the right buyer.
Third, the “mood” of the market is now pixilated, which means it varies from property type to property type, and from location to location. The red-hot color of the entire market in 2021 has been changed into more of an array of reds and oranges, depending on which sub-market you study. This makes it challenging for buyers and sellers to agree on whether it’s a seller’s market or a buyer’s market, which, in an increasing number of potential-deals, is creating a “gap” between buyers and sellers, especially in the negotiation process.
As we move further into the the Fall Listing Market, these three factors (interest rates, inventory, and mood of the market), will all shape how the 2022 market year will end and the 2023 market year will begin. The market is always evolving, as are the factors that shape it!