In the spring of this year interest rates were predicted to rise and buyers reacted by entering the market in record numbers. Buyers outnumbered sellers and what resulted was a buying frenzy. Investors drove up values in income-producing properties and traditional homebuyers seeking their next home saw prices escalate rapidly. And then in May, the Federal Reserve began a series of rate increases that in effect put the brakes on home sales. June, July, and August had nearly half the number of home sales as compared to the same three months in 2021. You would have to go all the way back to 2014 to find fewer home sales during what is normally our highest sales season (see chart below). Clearly, the rise in interest rates has had a cooling effect on home sales. Another reason for the lack of sales is a lack of inventory. Even before the interest rate hikes, inventory was at an all-time low in every submarket.
List Prices were adjusted in May/June and came down approximately 20% from the frenzied peak of Spring 2022. The question is, will it continue to adjust downward? Migratory buyers see home values relative to home prices in the housing markets they are coming from. St. Simons remains undervalued compared to many other resort markets around the country. Regardless, some buyers are priced out because of the rise in interest rates. If interest rates stabilize in the 7% range buyers may interpret this as the new normal. Continued migratory demand and competition for valued properties may be enough to put the brakes on further price reductions.
The chart above shows the number of sales transactions by area last month (October) and compares the October numbers to previous years. It clearly shows that we have rebounded to 2019 (pre-covid) sales levels. This is better than the summer numbers discussed above. The takeaway may be that supply and demand are finding the new normal. Perhaps this new normal is more the old normal and buyers and sellers can move forward with confidence that the market is going to stabilize at current levels.
