I had lunch with a good friend who is also a realtor earlier this week. He started a discussion about statistics for our local area. That got me doing some digging on my own.
I saw something interesting. Sort of scary really.
Now, I am comparing October of 2021 to October of 2022 here. October of 2021 was a crazy time when about every house was selling immediately and often for well over the list price.
Want to guess which price range is seeing the biggest decline in both closed and pending sales since rates rapidly went up? The sub $200k price point. Want to know which price range saw the least decline? Over $500k.
Pretty much all the stats show the first time homebuyer price range hit the hardest. You would think during a period of high interest rates, the more expensive houses would struggle to sell, wouldn’t you? From what I have read about the last time we dealt with inflation in the early 1980s, it was very hard to sell an expensive house back then. That’s why you don’t see many big, nice houses that were built during that time but you see tons of smaller starter homes.
We need these first time buyers. They are the ones that push the rest of the market since they have nothing to sell before they can buy. Think of it like a baseball game where the bases are loaded. The person on 1st base can’t move to 2nd base until the batter swings and hits the ball. The person on 3rd and 4th base are also stuck there until that batter hits the ball. The first time homebuyer is who we rely on to hit a home run since every other buyer is also a seller who has to breakup with their old house in order to move to their next one.
Historically, it has always been easier to sell a more affordable home than to sell a more expensive one. Statistically, it is easier to sell a more expensive house today than a more affordable one.