I was looking at my company’s year-to-date (YTD) performance this afternoon. We were cooking along so good – right up to the end of April. Coldwell Banker Chesapeake Real Estate agents were outperforming 2021 – the best year in the company’s history. And then we went smack dab right over a cliff. Did all the buyers go to the beach? Did anybody get the license number on that truck ? It feels like October 2008 : Déjà vu all over again! But this time is different.
The August numbers are out. April wasn’t an anomaly. It was an inflexion point . A tipping point. A tooth jarring speed bump. What happened? Simple. Interest rates. The FED stomped on the brakes. It took the froth right out of the market. Irrational Buyer confidence evaporated overnight. POOF.
Take a breath. Keep this in context. Don’t panic! Just after I got in the real estate business, on October 16, 1981, the 30-year fixed-rate mortgages hit 18.56% (!). According to my friend FRED that same rate today is 6.29%. The average mortgage rate since 1972 (the year I graduated high school) is approximately 7.5%. Today’s mortgage rates are not high: they’re just right about where they were in July 2007. GULP…
Ok, So what’s different this time? Look closely at the dashboard at the top of this blog:
We continued to sell real estate on the Eastern Shore in June. The market did not collapse. 425 properties closed escrow in August – just down from the 5-yr average of 455. Keep in mind that average includes the COVID boom years of 2020 and 2021. (the good old days)
The Eastern Shore real estate market has returned to normal. The combined total of closed and pending transactions in August (1002) is roughly equal to 2018 (1014) and 2019 (1150) Life goes on. Sellers and real estate agents will feel better about the market when they start getting used to normal as , well, normal.
Here’s what’s different. I have circled it in red. There is nothing for sale on the eastern shore. Nada. Zip. Zilch. In the past 5-years (including the COVID boomtimes) there were an average of 1286 properties actively listed for sale. In August 2022 there were just 699 active listings – that’s not normal. This is so abnormal – it’s a really good thing. This lack of supply plus normal demand will keep real estate values from collapsing like they did in 2008.
Watch the “months of supply” gauge going forward. It has been stuck on 0 for some time. At current demand and supply there is 1.7 months of supply. It will creep upwards as more sellers come to market in coming months and demand stays normal. Housing economists say that it’s a Sellers market when there is less than 6 months of supply. When there is more than 6 months supply it becomes a Buyers market. We are a long way from that inflexion point.
Hugh Smith, Broker of Coldwell Banker Chesapeake Real Estate serving the six counties of Maryland’s Upper Eastern Shore including Talbot, Dorchester, Carolne, Queen Anne’s , Kent and Cecil. First licensed in 1979 in New Mexico, Mr. Smith has been a licensed Maryland Real Estate Broker since 1983. He is also licensed in Delaware and Pennsylvania. Smith is a former President of the Mid-Shore Board of Realtors and the Founding and First President of Habitat For Humanity of Talbot County (now HFH Choptank), A lifelong resident of Talbot County , he and his wife Chata live on the waters of Peachblossom Cove near Easton.