The more things change, the more they stay the same. That’s one lesson that can be learned from this past year’s real estate market, which saw frenzy in the spring (remember when every house seemed to have fifteen offers and sell for $100,000 over list?) and pretty much the exact opposite of that in the fall. We saw interest rates double in the space of a few months, and now we’ve seen the median home price in our area drop 10-15% in the same amount of time.
That’s the change part, so here’s where the second part of “the more things change, the more they stay the same” comes in. The median home price on the west side of Portland in December was about $542,000. It was $550,000 last January. Everything that happened in between is in the ether now. True, there was more activity back in January and more buyers in the market, but ultimately what we just saw was a reset. We start 2023 pretty close to where we started 2022. Where it goes from here is anyone’s guess, but I’d bet dollars to donuts we don’t see another silly season like we did last year.
One thing that I don’t expect to see this year is the same drop in prices from December to January that we saw last year. Since I’m not afraid of being wrong out loud, I’ll suggest that the seasonal drop that comes around the holidays happened a month earlier this year. We’ve been in a period in which most of the houses being sold were out of necessity rather than desire, and as we get clear of the holidays and see more stability in interest rates I believe that we will see more sellers who want to sell and more buyers getting back to it. After all, who wants to move during the holidays?
Speaking of those pesky interest rates, it’s been about three months now that they’ve been relatively stable. A half a point drop here, half a point increase there, but generally they’ve stayed in the 6-7% range since the end of September. All indications are that this will be the new normal, at least for a while.
So what does a perfect world look like in this first part of 2023? I don’t mean a perfect world where interest rates magically drop to 3% and every home comes with a suitcase full of unmarked bills hidden in the crawlspace, but a realistic perfect world. To me, it looks like one in which buyers accept that interest rates will be what they are for the foreseeable future, and plan accordingly. It’s one in which sellers recognize that houses still sell as long as you’re making your product competitive. It’s one in which sellers aren’t afraid to list because they think the demand has dried up. That’s a healthy market, one in which both buyers and sellers have skin in the game, and where buyers can feel comfortable with their options. Why not start the year optimistically?
