We certainly live in interesting times. The past three years have seen a pandemic, unprecedented logistics problems, markets shifting farther and faster than ever before, and so much more. With all the headlines competing for attention, it can be easy to become overwhelmed by the drama. While I don’t have a crystal ball to look into the future, I do have knowledge and experience in our local real estate market. Here are my thoughts on this past year, and what might be coming for us in the coming months.
Winter and spring of 2022 continued to ride the wave of historically fast real estate transactions from 2021. The trend in inventory shifted from the constant dwindling seen last year, with a slowly increasing inventory leading to more opportunities for buyers. Here in Chester County, this shift has been less dramatic than in other parts of the nation.
Many headlines highlight how the real estate markets of 2022 have been less dramatic than in 2021. They cite the year-over-year differences and declare dire times are upon us. Looking at the numbers, 2021 was the top statistical year of all time, with 2022 still being the second most statistically significant market ever in Chester County.
The summer is traditionally the most active time for family home sales, and 2022 was no exception. Within Chester County, the increase in interest rates enacted by the Fed seemed to have less impact on sales volume than regular, historic trends. The summer saw the most sales of the year, with an expected slow-down in sales pace beginning as fall rolled in. Even with the Fed’s interest rate increases, the median sale price in Chester County is higher now in December than at the beginning of 2022, with prices on all real estate expected to continue rising through the new year.
One impact these rate increases have had on our area is the opportunity for first-time buyers to enter the market. While inventory continues to crawl back up from historic lows, the high mortgage rates have made financing a first home a larger obstacle than ever before. New rental unit construction, while contributing to the shift in inventory pacing, likewise continues to raise in price, creating an even steeper barrier for those who rent to become those who own.
The rate increases have also injected uncertainty into our market, leading some to wait and see, hoping for more clarity of information before entering the market. With less competition and increasing inventory, the uncertainty of our current times creates opportunities for those with the expertise to find them. Now is a prime opportunity for buyers to work with an experienced agent to find the home of their dreams, knowing they can refinance later and could end up saving big.
The end of the year has seen more activity than usual, even with the higher mortgage rates driven by the Fed. Compared to last year, the market is in a bit of a slow period, but compared to historic norms, we’re still running hot. Dramatic headlines draw attention to the “bad news,” though local expertise with hyper-local experience and information paints a more realistic picture of our area.
The next few months are not something I, nor anyone else, can accurately predict. With hyper-local data and expertise, we can make informed guesses, but even then, it’s important to remember that we live in interesting times. The historic trends would suggest January and February are slow months, with real estate transactions picking up near the end of March. The live market data for our area suggests the next few months will continue to see historically high activity, though less frantic action than the year before.
Inventory is likely to continue to rise somewhat, with median days on market expected to climb back towards the 2-3 week mark. More time on the market allows increased negotiations, especially for mechanisms like property inspections, and leads to more informed decision making on all sides of the deal. With the market still moving faster than historic trends, I do expect homes in good condition to continue selling very quickly.
Most prognosticators expect interest rates to remain high through these next few months, suggesting the “wait and see” mentality will continue. Those who enter the market now will have less competition and ultimately be better prepared when the mortgage rates stabilize and pent-up demand is released. With so many people trying to take advantage of the market stability to find the home of their dreams, frantic markets are likely to prevail.
While some buyers and sellers may hold off in the short term, they are likely to eagerly enter the market once the future of mortgage rates is determined. Prepared buyers and sellers that have already been working with lenders to find financing programs that meet their needs will be well positioned to find their place in the world, while those that wait to get ready are likely to be lost in the shuffle.
All of these predictions are informed and influenced by articles and prognostications from professional analysts, raw data I’ve assessed myself, and my boots-on-the-ground experience with our greater Chester County area. Like any prediction, they are prone to change or even be proven wrong. Looking at national trends from last year may be useful for identifying historical trends but does little to inform actual trends where we live. Real estate is, after all, hyper-local and constantly changing.
As a real estate professional, I know that, while looking forward is important, it’s more important to remain keyed into what my local market is doing and be able to adjust tactics to the realities of the marketplace. I’ll be continuing to look at the best forecasts, data sources, and real-time sentiment throughout Chester County relating to our real estate marker in order to provide the best advice and service to all my clients in the coming year. Please do get in touch to discuss your goals, questions, and concerns.
Happy 2023!
