What a sobering reminder for sellers.
There is a reason why buyers haven't had as much of a competitive advantage over sellers in recent years. There has been a severe scarcity of inventory in the housing market. At the same time as mortgage rates started to drop to record lows, the number of homes that were available started to decrease. Due to the enormous discrepancy between supply and demand, housing prices skyrocketed.
This year, sellers have nonetheless reaped a fair amount of profits. The rise in property prices, though, is obviously moderating. Taking August as an example, the S&P CoreLogic Case-Shiller U.S. National Home Price Index shows that home prices increased 13% year over year. However, it moves at a slower pace now than it did in the months before.
In the meantime, the world's largest investment bank, Goldman Sachs, recently issued a warning regarding the housing market. In particular, it anticipates a significant slowdown in the market as buyer demand declines in the upcoming months.
Do sellers need to worry?
According to Goldman Sachs, home price growth will fully stop in 2023 and will average 0%. That's not the best of news because it can indicate that in the upcoming year, sellers will end up getting much less money.
Why is the prognosis so bleak? It has to deal with supply and demand rules. The lack of available inventory in the housing market in 2020 and 2021 was the primary factor driving up home prices during those years.
Currently, inventory levels are still lower than average. But as more buyers leave the market because of things like rising mortgage rates and recession fears, the demand-supply gap is likely to close. Additionally, sellers will lose a lot of the advantage they have had over the past two years once buyer demand declines to the point where there is an adequate supply of homes listed for sale.
Sellers should move quickly
If you're interested in selling your home, then the time to act might be now. We're already at a point where mortgage rates are the highest they've been in several decades, and that alone is impacting buyer interest. But at least we're not in a recession right now.
That might change in 2023, and many financial analysts are confident that the economy will significantly deteriorate in the coming year. If a recession occurs and a wave of unemployment follows, more consumers will leave the market. Therefore, it is best to list your home now, while the economy is still holding steady and the labour market is still strong, in order to avoid that scenario.
That being stated, anyone trying to sell a house today must be careful when setting the price. Sellers can no longer charge the outrageous prices they could when consumer demand was at its highest. Working with an experienced real estate agent who can help you price your home correctly and get the most money for it makes sense if you're looking to sell.
Our editorial opinions are our own and have not been previously reviewed, approved, or endorsed by featured advertisers since we firmly believe in the Golden Rule. Not all deals on the market are covered by The Ascent. The Ascent's editorial material is distinct from that of The Motley Fool and is produced by a different analytical team. Maurie Backman does not own any of the above stocks. The Motley Fool supports Goldman Sachs and holds positions in the company. There is a disclosure policy at The Motley Fool.
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