As we close out Q3 2022 and adjust to our new normal of sharply higher interest rates, the threat of a deeper recession and the volatility of the stock market, clients constantly ask me to advise and guide them as they navigate the real estate market. The biggest challenge we face is the uncertainty and rapid pace of industry wide changes.
How will things play out in Q4 and beyond? Looking into my crystal ball:
- The Fed will continue its policy of raising rates.
- Buyers will continue to wonder, with hope, whether prices will come down if they wait. Savvy buyers will take advantage of this moment of uncertainty to make low offers and negotiate a winning price on quality property.
- Sellers will adjust their expectations and get over the fact that they missed selling at a premium. They will still do very well but will need patience. Many will offset their paper losses if they are buying something else. Sellers who understand the nuances of the market based on curated data will adjust more quickly to the market's reality.
- Inventory levels will increase, but there will still be a shortage of quality product, priced for today's market.
- Rents will scale back to more normal levels. We are already seeing the reduced costs of gasoline at the pump, construction products and some retail. Will real estate be far behind?
- As soon as the Fed pauses interest rate hikes, I foresee a surge in all markets, including real estate. Markets like clarity and are uncomfortable with fear and uncertainty. Better days lie ahead.
I invite you to gaze into my crystal ball together with me to see how changes in market conditions are likely to affect your specific real estate interests.