As 2023 winds down, I’d like to look back at more than just 2023. Let’s take a glance back at 2020 – 2023, because it’s been such an odd Real Estate market, both locally and nationally.
In March of 2020, government mandated Covid restrictions were imposed. However, we were fortunate in West Virginia when it came to Real Estate. Thanks to the efforts of the CEO of the West Virginia Association of REALTORS®, Ray Joseph, our governor declared Real Estate essential. You might normally think that only emergency services would be essential, but the governor agreed that Real Estate was critical to keeping our economy afloat.
As Covid continued, we encountered home inventory shortages. At first it was due to fear among sellers, when it came to having strangers in their homes. At another point, the price of lumber shot up drastically, which negatively affected new construction, but lumber related repairs requested by buyers, also became a challenge. As low inventory continued, home prices rose considerably. It was simply an issue of supply and demand. There were more buyers than there were available homes, so buying became competitive. I had clients who twice offered $25,000 over asking price but didn’t get their offers accepted. Potential sellers were in a position of power BUT many didn’t want to then become buyers themselves. So, do you see how this led to a bizarre market?
Adding to the bizarre market, buyers also had an advantage via historically low interest rates. There came a point where we saw rates at roughly 2.5 percent. Although I was just a kid in 1981, I remember rates being in the mid 18 percent range! If you don’t believe me, look it up! When you have that perspective, rates around 7 or 8 percent, don’t seem quite so bad.
Having said that, rates were closing in on 8 percent not long ago. At the time I’m writing this column, they’ve dropped back down into the upper 6 percent range. Economic experts and political pundits have been predicting this given we’re coming into an election year. At the end of the day however, neither REALTORS®, lenders or even economists have a crystal ball. There are pros and cons pertaining to listing or buying a home at this time. If you purchased a home in the past couple of years, you’re not going to get a similar rate now. However, there’s always the possibility of rates coming down eventually, which would give you an opportunity to refinance. Keep that in mind!
For those who may not understand, the concept of lowering rates is to give the economy a jump start. On the flip side, raising rates is supposed to slow down inflation, which in the past couple of years, has been at a four-decade high. For reasons which are debatable, that approach hasn’t worked out this time.
Much is to be determined in 2024 when it comes to our economy and that will affect the Real Estate market, both locally and nationally. Stay tuned!
Brian McCommon, 2024 MBOR Presdient