One of the biggest topics in real estate right now is if the market is shifting. While we are seeing the beginnings of a shift, there are important factors to look at to understand why the real estate market is behaving like it is. And, no, the market isn’t going to crash.

The two biggest influences on the market are pricing and inventory, and they are very intertwined.

Inventory

We are seeing the normal seasonality when it comes to inventory. The number of homes on the market is increasing, as you can see on this graph from Altos Research, pulled at the time of publishing on 6/6/2022. 

Having seasonal trends reliably come back is refreshing after the nonstop upward trajectory caused by the coronavirus-induced real estate boom. Having the market move seasonally is also healthy for the market.

Pricing

The meteoric rise in prices over the last two years (especially in Boise) was caused by a large number of buyers entering a market with low inventory. Following the basic laws of supply and demand, high demand for a scarce product (in this case, houses) causes prices to rise. Now, we are seeing price increases beginning to level off, closer to the 2-6% home value appreciation growth that is normal in a healthy market.

This does not mean that the real estate market is crashing, merely that the market is becoming healthier as buyer traffic slows, the number of existing homes for sale increases, and more new construction homes are built.

In addition, rising interest rates are making many buyers pause their homebuying efforts. Buyers on the lower end may be getting priced out of the market by rising interest rates coupled with record-high home prices. Many other buyers will have to adjust their search parameters and make concessions about location, price square footage, etc. to fit shifting affordability. 

Finally, buyers are evaluating their budgets thanks to record-high gas prices and inflation. Higher prices are eating into buyers’ budgets and ability to save for a down payment.

How do the numbers compare to your experience? Let us know what you are seeing in the market by commenting on this post.

Read part 2 of this post about why the Boise, Idaho real estate market isn't going to crash here.