Same thing, only different. While a pendulum swings back and forth, shifts occur more sporadically and without particular notice. These dynamics strongly define real estate market movements over time.
Going back to 2007, before the Great Recession, there was a shift occurring in the economy. New economic policy would end the homebuying frenzy of the time, which was fueled by loose lending policies and rampant fraud. And Wall Street was fully complicit in the subprime mortgage portfolios they allowed to be grossly overvalued, creating huge risks to unsuspecting investors. So, when economic tightening was warranted, including the treatment of mortgage loan portfolios on Wall Street, the dominoes began to fall. By the time it was done, we had record unemployment and the worst rate of home foreclosures since the Great Depression. That was a gargantuan shift! Cue the 2010, 2011 bailouts, subsidies, and Fed manipulation of interest rates that were designed to revive the economy. It worked, but not without a cost. Companies began expanding and hiring, and unemployment fell dramatically by 2014. The housing market rejoiced with rising home sales and home appreciation. By 2015, almost everyone with an existing home and everyone purchasing a home enjoyed mortgage rates as low as 2.75 percent!
This is where the Fed and three White House Administrations screwed up, in my opinion. As the economy improved, those artificially low interest rates should have been allowed to rise incrementally. But Obama, Trump, and Biden, along with their respective Federal Reserve boards, enjoyed the popularity that came with all that low interest rates produced, ignoring that there would be a piper to be paid eventually (inevitable inflation). In this case, they, and we, enjoyed the swing from the Great Recession to the great prosperity that returned in the mid and late 2010s. Oh, but the Federal deficit. When will that piper come to call?
It’s amazing how everyone from Main Street to Wall Street to Pennsylvania Avenue often behaves like the status quo will just go on and on. When will we ever learn to prepare for the next shift?
When COVID-19 hit in 2020 and the world essentially shut down, our government had to take drastic measures yet again. Trillions of dollars more were minted to help
locked-down individuals and businesses of all sizes to survive until the pandemic passed. Those who could quickly learned to work remotely, while those who couldn’t either stayed dormant at home or masked and gowned as needed to function cautiously amongst other people. In most of these scenarios, however, productivity was greatly diminished, and many were struggling to get by. But for those who weren’t, a never-seen-before phenomenon took place strictly as a result of the lockdowns. A large number of homeowners (and non-homeowners) realized that they lived in homes that were not conducive to working from home, especially when they had a spouse also working from home and, worse yet, kids simultaneously schooling from home. Interest rates were still low, so it seemed this was the time to make a move. Again, due to low interest rates, many of those homeowners decided it was more prudent to buy their new home and hang on to the old one as an income property. These two factors— increased demand and decreased inventory of available homes—created one of the strongest and fastest increases in home prices that I have seen in my 42 years of selling real estate. There is a third contributing factor, and that is investors, from individuals and small LLCs to monster equity firms, buying up homes by the hundreds of thousands across the country. This shift of home sales into high gear quickly saw home prices rise by as much as 40 percent in just two years. Tragically, first-time homebuyers were all but shut out.
Eventually, home prices hit the point of diminishing returns. Many investors pulled out, and many would-be homeowners just gave up. In 2023, we saw a downshift including, finally, a rising inventory of available homes. Could the pendulum be swinging back? Possibly. A swing may be occurring as we’ve seen a relatively balanced market in 2023 and 2024, and now indications of a buyer’s market in 2025. It is important to note that there’s no such thing as “The Market” relative to your home. That would be the market on average. Every city, every neighborhood, and every price range behaves differently, so, in fact, there are still market segments that are in the seller’s market and receiving multiple offers, while there are other segments that are truly soft. On average, the market is slightly into the buyer’s market range, so there is still a lot of the market that we’d consider balanced. If selling or buying or both, let your agent show you the most current and pertinent data so you have a clear understanding of where you truly stand concerning actual home values. To underestimate or overestimate the value of a home you’re selling or proposing to purchase will have a negative impact on you in the end.
In summary, a shift has occurred, which may be a swing from 2021, or it may just be an adjustment—a temporary shift. More will be revealed over the coming months.
Happy Homes!
—The KC Butler “Home” Team
