There is rampant speculation that home prices must come down to compensate for higher rates. But there is another solution.
We learned a couple of lessons during the peak covid days:
- Sellers don’t have to sell – they can wait it out.
- When they do, the market can survive with fewer sales.
Look at the NSDCC sales in the past months of May:
2022: 126 so far
We might not hit 200 sales this month, and while the doomers and mainstream media will be talking about how the demand has been crushed and there is no hope, will the sellers panic? Even if they aren’t receiving offers? Or not having any showings at all?
Have you seen anyone dump on price yet? Not really.
Are today’s sellers willing to keep reducing their price until they find what the market will bear? Doubt it – and after two price reductions (three tops) they will give up, rather than keep lowering the price. They can blame on ‘the market’, or on their realtor, and decide to try again next year.
Anybody who needs the money can borrow against their hefty equity positions or get a reverse mortgage. If they can’t make their payments, they can float for 6-12 months while their lender decides if they want to get back into the foreclosure business, which is California means you have to offer the borrower a loan modification before you can foreclose. It will be months, and probably years, before we see any real foreclosure activity – if any. If they have to, the non-payers can drag it out at least until next year, live for free, and just sell for less then.
Sellers might get a little antsy, but it will take more than that to give up hope of cashing in that big ticket. They have been dreaming for months about what they are going to do with all that money, and they aren’t going to give up on those dreams easily.
Price-wise, we will hang out in Plateau City.
There will be an occasional big sale that keeps everyone optimistic – this will be the next one in South Carlsbad which was on our private site at $3,100,000 but hit the open market at $2,880,000, which should really rev the engines this weekend:
But most listings will languish, which is ok. It’s how we used to do it, and we survived!