Will the Charlottesville Real Estate Bubble Deflate, or Pop?

Will the Charlottesville Real Estate Bubble Deflate or Pop?

First, I don’t think we are in a real estate bubble, but I do think we are in an economy that has become prohibitively expensive for too many.

The better actual first answer is the one I’ve said for most of my career – I’ll tell you in 18 months what happens tomorrow, combined with “I don’t know, but I’m trying to figure this out.” No one knows with certainty, but I think I have a reasonably educated and experienced prognostication.

See the video below in which Mike notes that this rapidly shifting market is confusing, and is defying the models.

But … I do think that we are going to see a softening of prices, stabilizing of interest rates (hopefully), and homeowners are going to have to adjust back to a real estate market where what you want to get for your house is 100% irrelevant, and that you need to make X in order to go buy Y is equally relevant.

Nationally, home prices were up 20% in May 2022. That is not sustainable. It just isn’t.
Housing inventory is rising, quickly.

I’d encourage everyone to read my most recent note (and please subscribe if you’re interested); last month I wrote about the rapidly changing real estate market. Part of what I wrote:

“I think we’re in a transitioning market rather than a transitory market; everything is different now.

This is a bit of a scary time in the real estate market. In the end, it will be OK. The move from a super-hot, multiple offer, escalating offers market to a much, much more conservative and even aggressive pricing strategy market has been fast.”

We’re moving to equilibrium very very quickly.

What happens next?

Buyers are going to adjust to this market much faster than will sellers; this may be the opportunity many have been waiting for (although, if they’d bought a couple of years ago, they would have been able to live in their owned home and theoretically be building equity).

I wrote in February:

“Price Matters

Or, the two weekends of disappointment theory.

106 resale homes were listed in January 2022 in Charlottesville and Albemarle. 71* of those went under contract. 92 went under contract by 2/08/2022 (when I started this note) and 101 by 22 February.

If you’re not under contract after the first two weekends, you might be overpriced. In other words, if you’re not under contract after the first two weekends, a price reduction might be in order, because today’s buyers are watching the market in their specific market segment like proverbial hawks. They know the market.”

Almost everything Mike says here is applicable to the Charlottesville area real estate market, notably that:

Homes that are less than perfect and would have sold immediately in the hot market, might not now.
A lot of sellers might be surprised and disappointed when they start the conversation about pricing and putting their homes on the market.