Hamilton Herald Masthead


Front Page - Friday, June 24, 2022

3 faces of changing real estate market

Opposing, intertwined forces at work driving prices, anxiety up

Keller Williams Realtor Angela Pierce was spending time with her extended family when the inevitable happened: Someone mentioned the housing market.

Pierce, 37, enjoys getting together with loved ones and talking about anything but real estate. But as someone who typically says she works “eyes open to eyes shut,” she’s also accustomed impromptu discussions about home sales with clients, friends and “strangers at the grocery store.”

“Everyone wanted to talk with me about real estate because it’s a hot topic,” she says. “Since I’m always thinking about work, even when I’m not in front of a computer, I was game.”

Pierce listened before she spoke.

“One person said their neighbor sold their house in three hours. Another person said the market will cool down as interest rates rise. And then someone else said the market is going to crash because we’re running out of houses to buy and sell.

“I said, ‘All of you are right. Each of those things is happening. But they’re also colliding with one another, so thinking you can predict a certain outcome based on a single detail is wrong.”

As Pierce spoke with her family, she began to envision the housing marketing as an individual with three distinct personalities, all of which are engaged in a perpetual tug-of-war.

The first personality to emerge was a sleek businesswoman with big sunglasses and a Prada pursue, Pierce says with a smile. When this personality is dominating a transaction, houses attract multiple offers and sell with blinding speed. But it’s also easy for a Realtor to lose a bidding battle.

To temper this, Pierce sets realistic expectations with her buyers from the beginning of their house hunt.

“I tell them we’re probably going to make offers on several houses and will likely lose a few of those,” she says. “Real estate used to be about planning and maneuvering, but there’s no time for that now. You have to just throw everything you have at a house.

“When you lose, it’s not because they didn’t like your strategy, it’s because everything you have isn’t enough.”

If Personality A, as Pierce calls her, is very “profesh,” then Personality B is a “government fuddy duddy” dressed in ill-fitting pants, an oversized suit jacket and a tie that’s tied too short.

Despite Personality B’s shoddy appearance, he’s having a dampening effect on the market. But Pierce says all the noise about rising interest rates is just that – clamor and racket.

“Interest rates are going up,” she notes, “but they’re still reasonable compared to the [historical] average.”

Pierce quotes a Forbes article in which experts predict the 30-year, fixed mortgage rate will vary from 4.8% to 5.5% by the end of 2022 and gradually decline to 4.4% by 2024. (“Mortgage rate predictions for 2022” published June 9 on forbes.com.)

Even at these rates, people who purchase a house will gain considerable equity between now and when pundits believe interest rates will dip again, Pierce adds.

“An agent out of Maryland had a client sign a two-year lease for $55,000. Whereas even with a higher interest rate, if you buy a $300,000 house and appreciation is around 15%, you’re still going to gain $45,000 in equity.

“People were hearing ‘now is the time to buy, now is the time to buy, now is the time to buy,’ when interest rates were low, and now that rates are higher, they think now is no longer the time to buy.

“But that’s not the case. Buying a home is still better than renting one – even at a higher rate.”

If Personality A is a button-down business type and Personality B is a government minion, then Personality C is today’s working mother, Pierce says.

“Supply and demand are stretching the market thin. This makes me think of the working mother who not only supports her family at home but also juggles her responsibilities at work.

“But she handles it well. Maybe she starts with yoga pants in the morning, and by the end of the day, she’s slipped into a sleek dress and a pair of heels for cocktails with clients.”

Even though the working mother is stretched thin, Pierce says, people can depend on her. The same is true of purchasing a home in a market that’s not only smarting from a lack of inventory but is also reeling from the fears of people who believe current inflation might spark a recession, Pierce says.

“According to Realtor.com, we’re 5.24 million houses short of where we need to be in order to have a level playing field for buyers and sellers. And that’s due to the recession in 2008, when building came to a halt and was in a holding pattern until 2012.

“I tell people who are afraid of another recession that nothing is more recession-proof than housing. So, again, feeling like this is not the time to buy is incorrect.”

Pierce says she told her family the same thing she tells her buyers as she sets their expectations: Given the number of opposing forces in the market and the velocity at which they are colliding, predicting how a seller will receive any offer is hard. But she’ll do her best, based on her expertise, to help them win the struggle.

“This job would be easier with a crystal ball,” Pierce laughs. “I can advise you on what I believe based on my experience, but I can’t see the future.”