The real estate market, like many other industries, has experienced a series of ups and downs throughout history. It feels all too familiar — almost like a recurring cycle that we’ve witnessed before.
In fact, when we examine our current world, it’s clear that we still inhabit the same society with a similar, if not the same, socio-economic model and structure as we did decades ago. This begs the question: Are we truly on the cusp of an impending turnaround, or are we simply caught in the ebb and flow of a recurring pattern?
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History indeed repeats itself
As market shifts play out, I think the similarities between the past and the present become glaringly apparent, particularly when examining the 1970s-1980s and the early 2000s.
During the 1970s-1980s, the real estate market was plagued by rising inflation and interest rates, resulting in a dreary slowdown. Shockingly, recent data shows a disconcerting similarity.
Our data reveals that the average time required for transactions to close increased from a mere 4.32 months in 2021 to a staggering 5.57 months in 2022. This extended timeline eerily evokes memories of the sluggish market conditions prevalent in the 1970s-1980s.
Several years later, we observe a reprise of this pattern, with rumor-mongering and frenzied market activity fueled by lax lending standards and unhindered access to credit, easing the crisis brought by a worldwide health crisis.
Equally disconcerting, the early 2000s witnessed a meteoric rise in housing prices coupled with a dangerous relaxation of lending standards. We see history repeating itself in the recent past. Home prices have soared to dizzying heights, propelled by strikingly similar factors.
I’m not trying to downplay anything, but while the recent data doesn’t necessarily mirror the catastrophic subprime mortgage crisis and the subsequent global financial meltdown of 2008, it stands as a chilling reminder of the potential economic perils lurking around the corner.
How speculative should we be based on recent history?
Our data points from the past three years reveal some tantalizing insights into the real estate market. The overall comparison between 2021 and 2022 paints the same bleak picture of a market grinding to a slow halt, as indicated by the longer time taken to close transactions.
During this time, we confronted the harsh reality that buyers and sellers may have entered a perpetual negotiation dance.
Taking a look at the data for January to April of each year reveals the drastic fluctuations happening in the market. The surge in paid transactions in 2022 suggests a frenzy of buyer activity, driven by low mortgage rates.
However, the subsequent decline in transaction volume in 2023 plunges us into a vortex of doubt, hinting at a potential slowdown or perhaps the awakening of rationality.
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Relating our data to national statistics
To gain a broader perspective, let’s compare our SetSchedule data points with national statistics provided by the NAR. According to the NAR, the real estate market experienced significant growth in 2021, with a surge in home sales and increasing home prices.
However, as we entered 2022, the market started to cool off slightly, resulting in a slower pace of sales. It appears that the real estate market, no matter how localized or segmented, is not immune from the gravitational force of national dynamics.
Forecasting a potential turnaround
Analyzing the historical data and observing the current trends in the real estate market, it is reasonable to predict a potential turnaround or anticipate the repetition of an upward cycle that we have already experienced in the past. The similarities in the factors influencing the market today suggest a familiar pattern that may unfold once again.
The decrease in the total number of days before a transaction is closed and the average time closed in the first four months of 2023 compared to 2022 hints at a glimmer of hope, a flicker of optimism in the hearts of buyers and sellers. Although the total number of paid transactions decreased, it would be remiss not to consider the erratic nature of market fluctuations and external influences.
Looking ahead, if the trend of decreasing time to close transactions persists throughout the year, it may indicate a seismic shift toward a seller’s market. As the market gains momentum and competition among buyers intensifies, sellers can revel in the prospect of more favorable conditions and potentially higher sale prices.
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As we navigate the ever-evolving real estate market, it’s crucial to acknowledge the patterns of the past while maintaining a cautious and informed perspective. History may repeat itself, but each market cycle brings unique dynamics and challenges. Analyzing the data, drawing insights and remaining adaptable, helps buyers and sellers make informed decisions in this complex landscape. Ultimately, the future of the real estate market will unfold with its own twists and turns, and it’s up to us to navigate them with wisdom and foresight.
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