Following many years of extremely high demand and record-breaking home prices, experts agree that a housing correction is underway. In October 2022, housing prices were 38.1% higher than they were in March 2020. However, prices started to drop in November 2022 and have continued falling. Experts now predict another 10% to 15% decrease by the second or third quarter of 2023.
If you’re a real estate agent or considering a career in real estate, you may wonder exactly what a housing correction is. More importantly, you likely want to know how it may impact your career. Here’s what you need to know.
What Is a Housing Market Correction?
A housing market correction occurs when there’s a decline in the overall value of the real estate market. This is not a large crash, but rather a slowdown that brings prices back to a more sustainable level.
While price corrections may sound alarming, they are a natural part of the economic cycle. Corrections can create potential opportunities for savvy agents.
Signs of a Housing Market Correction
Signs of a housing market correction can be subtle. Typically, you might notice that there are more houses for sale. Houses may also stay on the market longer.
Prices may start to fall slightly. However, as lenders become more cautious, it may be harder for buyers to qualify for a mortgage. You may also notice a drop in the total number of homes sold during a market correction.
Causes of a Housing Market Correction
A housing market correction is usually the result of a combination of factors that build up over time. For example, markets may be impacted by an economic turndown that reduces overall purchasing power. This can lead to a decrease in disposable income and a fewer number of eligible buyers.
Rising interest rates can make mortgages more expensive. This can deter buyers from entering the market. Overall economic instability can also make both consumers and lenders more cautious. When this happens, potential home buyers may postpone large purchases. Lenders may also implement stricter borrowing criteria.
How Does a Housing Market Correction Affect Agents?
When the markets begin to correct, the role of real estate agents becomes even more critical. While there may be fewer transactions, those taking place often require more guidance, expertise, and reassurance. These are all services that a great real estate agent provides. As markets begin to shift, the strategies and tactics agents use to serve their clients must adapt as well.
How Housing Market Corrections Affect Buyer’s Agents
During a housing market correction, properties become more affordable. There’s typically less competition, and the pool of available homes usually expands. For buyers’ agents, this creates an opportunity to help your clients find great deals. With more inventory on the market, buyers can afford to be selective. Lower prices might also make previously unattainable properties more accessible.
However, during corrections, agents must sharpen their skills so they can expertly provide buyers with the services they need. You must be prepared to guide them through market uncertainties and stricter lending requirements.
How Housing Market Corrections Affect Seller’s Agents
Sellers’ agents may face challenges during a correction, such as longer selling times and potentially lower offers. However, this also creates an opportunity for you to shine. Strategic pricing and effective marketing can help you overcome these challenges and increase a property’s appeal.
You can also create value by supporting sellers through the process. This may include helping them understand the importance of being patient and waiting for the right buyer rather than rushing to sell.
Take Advantage of Housing Market Opportunities
A housing market correction isn’t a cause for panic. Instead, it’s an opportunity for real estate agents to adapt, grow, and learn. As an active real estate agent, these shifts in the market are simply part of the job. Understanding them can help you serve your clients better, regardless of current market conditions.
In fact, periods like these might be the ideal time to start your real estate career or expand your knowledge in the field. With the right preparation and a commitment to understanding the ins and outs of the market, you can build a successful real estate career despite a market turn-down.
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