“May you live in interesting times.” It’s one of those famous quotes that no one really knows for sure who said it, but we all know what it means. And for sure, the market is most interesting this year. These are challenging times, no doubt! So, all this affects real estate. In this article, we’re going to take a look at the impact of these “interesting times” on our housing market in the Great Smoky Mountains.
Probably the biggest game changer has been the continual rise in interest rates. For most buyers, whether they are looking for a home to move into or a vacation cabin that can be used to add income to their household, if they are buying with a lender then the monthly mortgage payment plays the biggest role in how much house they can afford to buy. So as the interest rates have gone up, the price of what they can buy has gone down proportionally. This has resulted in fewer buyers competing for higher valued homes and cabins. Less competition from buyers using lending takes the pressure off cash buyers to outbid the flurry of offers coming in, so the high offers we saw in 2021 and early 2022 are now a thing of the past – at least for the immediate future.
First, the good news. You own real estate in one of the strongest areas when it comes to riding out national and world-wide housing market stress. The level of visitation to the Great Smoky Mountain National Park last year was recorded at an incredible 13 million visitors. This demand for our area as arguably the most popular tourist destination translates into continued high demand for cabins and homes in our communities.
However, our real estate market is not immune to the global market. It is affected in the same ways that many other communities across the nation have been. We want you to be informed so that we can plot the right course as we continue to work to sell your property.
I have included a “Market Trend Report”- this data comes straight from our local market. It is the most current information available. It is detailed and helpful.
Looking at overall property sales for the first half of 2023 compared to the same time period in 2022 and the second quarter of each year so far, it’s a lot to process. (Keep in mind, this report looks at everything within our local MLS market, whether that’s permanent residence homes, vacation cabins, new construction, or land.)
Now, the bad news. Our market has dropped drastically in volume of sales – the combined total of all sales prices of homes. Currently we are off about 65 percent from last year, with projections to fall even farther based on pending current sales for the remainder of this quarter. In addition to the reductions in overall volume, the number of listings has fallen by more than 33 percent compared to the first half of last year, and to roughly half the number of listings during the current quarter compared to the same time period in 2022. So in looking at the numbers, we have fewer properties for sale, at significantly lower prices, and it is taking a bit longer to get them sold than it did during the high peak in 2021 and early 2022.
But it is not all bad news. Properties are still selling! Buyers are still buying! If you are thinking about selling, remember you only need one buyer for your property and that buyer is out there looking right now! The not so good news is that home prices are trending down. The average sales price is down almost 10 percent, which means that if you were able to get $770,000 for your home or cabin in the high season, this year your list price needs to be closer to $693,000.
Some interesting statistics, however: Things are still selling, but they are the listings that reflect the current values. Our closing stats tell us that once a contract is negotiated it remains very close to the list price. So very little negotiating right now is taking place on properties that are priced correctly for the current market. Once the price matches the market, the buyer perceives the value and purchases it. This is probably the most important insight to this market. I like this! Again, this means that buyers are not negotiating heavily. A winning strategy right now is to do a hard check on where you are priced. If need be, adjust the list price of your property to the current sold values on the market. In the illustration I gave you that would mean perhaps pricing at $720,000. Buyers would possibly still ask for between 2.24 to 4 percent off the price, bringing that negotiated end price to around $693,000.
Why is this? Because of the insecurity of today’s buyer they are looking for “a good deal” to give them the confidence they need to pull the trigger and buy. That is also why average days on the market are down. Once a property comes on the market at a “lower price”- 10% less than last year, they will move quickly. The average days on market during the first half last year was 75. Today average days on market is closer to 65. That means it is not a good idea to hang out in the market- 10% or more above market value when values are trending down. Buyers are using our “high priced” properties to prove to themselves that they are making “a safe” investment purchase, by buying something 10 percent lower than last year’s list price.
At the start of May, about half of the market remained listed at last year’s values. We did see a reduction in prices across the market as interest rates rose again, and new properties are coming on the market with an list price more in line with where properties are selling.
If you have been on the market more than 60 days, I recommend you ask your agent to do another “exacting market analysis of properties like yours that have sold” and then adjust as needed.
I hope this has been helpful!
