The Strange Market of Dr. Jekyll and Mr. Hyde
No, I have not been reading the classic novel by Robert Louis Stevenson. Once was enough, thank you.
The scholarly scientist – Dr. Jekyll can best be captured by a fellow ICON agent with whom I recently spoke. “Ivy, I am building a million-dollar home and with every dollar I can get my hands on I am buying investment properties. I’ve sold Austin real estate long enough to know I will never see homes priced this low again. I’m telling buyers, move fast, move now. Buy with a 10-year variable rate loan. When interest rates come back down, refinance.”
The malefactor Mr. Hyde can best be summarized by the double fiendish elixir of higher interest rates mixed with recent stratospheric housing prices. On Tuesday, Austin Business Journal reported, “In May, the median sales price of a home dropped 15% year-over-year…according to the Austin Board of Realtors (ABOR) market report.”
In the May ABOR report, closed sales were down 4%, new listings were down 12%, active listings were up 118% and months of inventory climbed from 2.2 months to 3.4 months.
For Dr. Jekyll’s case, Ashley Jackson, 2023 ABOR president noted, “That homes in the metro sold for 94% of the original list price in May, a sign that buyers are beginning to get good deals. Buyers purchasing below the list price can also encourage more market activity.”
Last September, Federal Reserve Chairman Jerome Powell told reporters, “The U.S. housing market was passing through a difficult correction” that would “restore balance to the market.” Fast forward to this month. Mr. Powell readdressed housing by stating, “We now see housing putting in a bottom, and maybe moving up a bit. We’re watching the situation carefully. I do think we’ll see rents and house prices filtering into housing services inflation, and I don’t see them coming up quickly. I see them wandering around at a low level.”
Allow me to conclude with a quotation from chief economist Ali Wolf who advises the White House on housing matters as well as national home builders.
“Builder sentiment has turned positive again. Builders are starting more homes and are enthusiastic about the demand pool. Objectively, the housing recession in the new-home space is over. Home sales are rising, starts are rising, and home prices are rising again in many markets. The big question is – is that it? Are we back in growth mode from here? I’m not so sure it is a straight line up. There are still broader economic concerns that could impact housing demand, including potential turmoil following the Federal Reserve’s restrictive policy, a significant pullback in consumer spending, or even fallout from the commercial real estate sector.”
In Stevenson’s novella, Dr. Jekyll succumbs to the smaller Hyde. A few contemporary fictional writers propose the same outcome looming large over residential real estate. My personal take? I’ll side with the chairman of the Federal Reserve. He may not be a scientist but when it comes to the economy, he is Mr. Macro Economist.
If you are of the same mind and think now is the time to buy, please contact me. During the great recession, I helped buyers make moves that created generational wealth. Who knows, maybe such a time is happening right now.