2022 07 26 | Don Miller | Residential Real Estate Trends

Don Miller, our Century 21 realtor, talked about recent trends in residential real estate, explaining some people, including a few in “positions of influence,” have forecast a (housing price) bubble bursting, with drops of 30 to 50% in value. Don believes there’s no bubble to burst, and we may see modest, but not alarming declines in value. He explained that a buyers’ market, as opposed to a sellers’ market is determined by the “absorption rate,” which is the number of homes sold, divided by the number of homes available for sale, within a defined time period. A “balanced” market is considered to be an absorption rate of five to seven months. Through the first few months of Covid-19, say mid-Feb to late May 2020, the rate went up to 14 to 16 months – then in summer 2020, we entered into a period lasting up to Spring 2022, where the rate went down to one or two months. During this prolonged sellers’ market, buyers were scared & frustrated, as they saw bidding wars, unconditional offers, a shortage of due diligence, & significant price increases. Those conditions have abated, the number of sales has dropped, & we’re heading back to a balanced market. If the current slowing of sales continues, we’ll see evidence of actual drops in prices (as opposed to simply drops in expectations) within a few months. Don says the reasons people move (marriage, divorce, changes in household size, retirement, etc.) don’t go away, so the demand for sales will always be there. Another reason to suspect price drops will be modest, is that demand for housing has long outstripped supply. He believes our different levels of government have been ineffectual in permitting & promoting new housing construction. There’s a reluctance to increase density; there’s “lip service” to affordable housing, but no real definition or significant support. Meanwhile, the cost of borrowing, and the costs of building are increasing, so there’s little reason to suspect life will get easier for buyers. Don reminded us of an old Gypsy proverb: “May you live in interesting times!”