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Eastern Shore Markets are Emerging from Hibernation in the Q1 Real Estate Scene
In November 2021, 30-year interest rates hovered around 3%. Twelve months later. rates flirted with 7% before falling back to the current national average of 6.28%.
At the end of Q4 2022 the only noise the eastern shore real estate market was making were “Crickets”. Skyrocketing interest rates caused Buyers and Sellers to hit the Pause button.
It appears that Buyers have grown accustomed to the new interest rate environment in Q1 2023. Our agents and some of our sellers are once again seeing multiple-bid situations and above-asking-price offers in the Q1 real estate market for homes on the eastern shore. Real Estate values are holding up well, even appreciating. The median sold price across the Eastern Shore during Q1 real estate season is up 2.97% year-over-year. Demand is strong. This varies among the six-county sub-markets. This market stability is due to very low inventory. Supply (listing inventory) remains weak. Sellers don’t want to come off their 3% mortgages to trade up to a 6.5% mortgage when considering moving into new homes on the eastern shore.
One trend that jumps off the Q4 page, but became more prominent in Q1 real estate, is that properties that are positioned well from the start (priced right) sell quickly. Fully 80% of all sold properties went under contract in less than 90 DOM in Q1 2023. The other 20 % of sellers ignored their trusted advisors’ (real estate agents’) best advice; speculatively priced their properties ( more than 5% above CMA); and. These properties took 90-720 days to find a buyer.
Positioning is critical in the information age. Buyers have a transparent window into the real estate market. Buyers have the same market data that real estate agents have and, with increasingly accurate auto-valuation tools and artificial intelligence (AI), are getting increasingly adept at interpreting that data. Today’s buyers know when a property is priced to sell and they know when it is priced speculatively.
We see this at open houses this Spring: properties that are ‘marked to market’ draw crowds of 20-40 prospective buyers . Properties that are speculatively priced draw 1 – 2 tire kickers. To promote competitive bids, some sellers – especially in the first-time and first move-up niches – are offering 2/1 mortgage buydowns. Our preferred mortgage originator Trent Riggs, of Main Street Home Loans, explains that a 2/1 mortgage buydown affords buyers the opportunity to pay 2% below lock-in rate ( e.g., 6.28% – 2% = 4.28%) for the first year, and 1% below lock-in rate for the second year. In year three and every year thereafter the rate is the lock-in (market) rate. This is especially attractive to young families, transient families, and buyers who expect rates to trend downwards in the next 3 years,
Going forward, we expect 30-year mortgage rates to fall further as inflation cools through the remainder of 2023. We expect rates to fall back to the 5.5% range by the end of 2023 – but there is no guarantee. If not we can all go back into hibernation.
