MAY 2022 REAL ESTATE MARKET UPDATE

May was a great month for real estate given all the changes we saw with plummeting stock prices, rising interest rates, and continued inventory challenges. We ended the month with very similar numbers to last May as far as new, under contract and closed properties. We did see a somewhat sizable drop in the average number of days properties spent on the market but the largest change was of course in home prices. We saw a 19% jump in the median sales price in Chittenden and Franklin Counties year over year. In May of 2021, the average home sold for .9% over the asking price and in May of this year, we saw homes selling for an average of 7.2% over asking - a huge jump in just one year's time!

Another big change from this year to last year is the cost of the average mortgage payment. At the end of April, the average monthly payment was up 43.4% year over year! That means borrowers are paying almost double what they would have last year due to getting a higher interest rate on the loan. This is understandably pricing a chunk of people out of the market, which is leading to the increase in the number of people choosing to put their home search on hold for now. 

And while the market is certainly still going strong, we are starting to notice subtle signs of things beginning to change ever so slightly. On the surface, things are still looking really great - we’re seeing a lot of what we’ve been seeing with properties selling quickly, generating multiple offers and getting over list price, however, if you dig a bit deeper, you’ll discover that there are a few telltale signs that a change in our market is on the horizon.

5 Signs The Market is Starting to Change:

1. More properties coming back on the market

This is something we really hadn’t been seeing very much of previously. For the month of May, 318 homes came back on the market in Franklin and Chittenden counties alone. Changes in people's investment portfolios, increases in interest rates and fear surrounding looming talks of a recession and a housing crash are largely to blame. 

2. Fewer Showing Requests

This one is more of a subtle difference, but there’s been a change in the number of showings requests that many properties are receiving. Typically when a home first hits the market it sees a surge of activity for the first few days and after that the amount of activity and interest it gets can start to dwindle. However recently we’ve noticed a dip in the amount of activity and showing requests newly listed homes are getting. Now, this isn’t all homes - there are some homes that will be extremely popular no matter what the market conditions are, but homes that previously might have had 10 showing requests in the first few hours now may have 3 or 4.

3. Less Offers

While we’re still seeing multiple offers, for a lot of homes, it just isn’t to the level that it had been in previous months and earlier last year. While this is a sign of a changing market, it certainly doesn’t mean that homes aren’t still getting multiple offers and selling for record-breaking prices - as mentioned above the median home price rose by 19% year over year and the average buyer paid 7.2% over list price for a home in Chittenden and Franklin counties last month. 

4. An increase in price reductions

Price reductions are up, which is a telltale sign that the market is starting to shift a bit. And these reductions are not small amounts, the drops we have been seeing are substantial, to the tune of $50,000+. Quickly fading are the days of buyers paying any price for a home no matter, which is an adjustment it may take some sellers time to get used to. Some still insist that they can ask any price they want for a home and we’re seeing them ultimately hurt themselves in the long run when they have to drop the price and the property sits on the market for an extended period of time. It’s still better to price yourself just under market value and allow multiple offers to drive up the price. 4,202 listings throughout Vermont had a price reduction in May of 2022 compared to just 3,532 in May of 2021. In Chittenden and Franklin counties the numbers were not that different from year to year, 317 this year vs 311 last year, so the price drops are tending to take place in some of the more rural areas of the state.

5. A slow in new construction

Across the nation, we’ve seen a dip in new permit submissions as well as starts and completions of new construction projects. Permits for single-family homes were down 4.6% in April compared to the previous month and new construction starts plummeted by 7.3%. Completions also dropped by almost 5%. A mix of supply chain constraints leading to the high costs of materials as well as concerns over housing affordability and the increase in interest rates are making building feel riskier and causing builders to pump the brakes a bit.

With a changing market of course comes concerns of a housing crash and with the Fed focused on lowering inflation, there is all sorts of talk that a recession is on its way. So what should you do?

1. Don’t panic! Are we headed for a recession? Maybe. But keep in mind that a recession does not mean a housing crash, and just like with everything in life too much of a good thing is not always a good thing! For the past two years, the housing market has been on steroids, so a little bit of a cool down is not a bad thing in the big picture. Markets go up and markets go down and we need that contrast to help create balance over the long term. 

   
   

2. If you are hoping to buy, make sure to look at your options and ask questions, specifically when it comes to loans and interest rates. There are a ton of options when it comes to mortgages and your typical 30-year mortgage may not always be the best option or give you the strongest interest rate, so make sure you interview a couple of lenders and ask questions about what the best loan is for your situation and what, if anything, they can do to get you the best rate possible.

Looking to buy, sell or just want more real estate advice, tips and market knowledge? Reach out, I’d love to chat!