A few months ago, Amanda Pohlman, a real estate broker in Keller Williams Living in Cleveland, told “Marketplace” host Amy Scott about how rising interest rates are pushing some buyers out of the market, and sellers are hanging on to unrealistic asking prices. Since then, mortgage rates have exceeded 7%And the consumer price index released Thursday shows that the price continues to rise to rent and rent the same as the owner.
Scott checked with Pohlman, who said homes are sitting on the market longer than they were in July. Below is an edited transcript of their conversation.
Amy Scott: So, with that understanding of local real estate, what are you seeing right now in your market and in the Cleveland area?
Amanda Pohlman: Well, in the Cleveland area, I would say the market has softened. What we are seeing now is a longer market period. We definitely have more homes available, though, I would say in the Midwest, because our real estate is pretty cheap, we still have a good amount of inventory, it’s going up, and we’re still in a seller’s market for sure. There is just more inventory around.
Scott: Is there more inventory because more people are putting their homes on the market or because homes are taking longer to sell?
Pohlmann: I believe because it takes longer for the house to be sold. For example, I’m in Solon, Ohio, and the average days on market has gone from less than a week to 89 days. So we definitely see more houses. Yehehehe, more houses. And I think that’s just because freedom at the time was low with higher interest rates.
Scott: Hehehe. So Freddie Mac said today the 30-year mortgage rate is above 7%. I mean, this time last year, it was under 3%. So what does that mean for affordability?
Pohlmann: This means that the purchasing power of the buyer is that they have to pay more money to get a house. So they’re looking for more creative ways, per se, to get into a home if they have to now, or they might decide to get out of the market because interest rates seem too high. Though in reality, they really aren’t that high. It’s just higher than they were, like you said, a year ago.
Scott: Hehehe. You know, when we talked last time, I think it was in July, maybe before the slowdown that you’re describing, you said that sellers are having some problems being realistic. [about prices] because the market is starting to slow down. Do they still hold, you know, more than they should? Or they start to see that, “You know what, if I’m going to move this house after 80 days on the market, I’m probably going to have to get it down.”
Pohlmann: Yeah, I think there was some sticker shock because the softening of the market happened so quickly, that a lot of sellers look back three to six months and say, “Well, you know, how did my neighbor down the street get $40,000 more?” They need to understand that the time in the market can be longer, especially if they try to push the price. The market is just not as strong as it is.
Scott: We have seen the reaction in your industry. Just this week, brokerage Redfin says that’s 13% of its employees. Many of them are in the process of restoring their homes. But you know, across the board, those in the business of selling real estate feel this. How does it feel to be in this business now?
Pohlmann: Yeah, I saw that too. And the agent is an employee, and most other agents and brokers are 1099 [contractors]. So such a model has not been tested in a market downturn. So we may see more of these unprofitable real estate startups struggling to adapt as this market correction continues to soften the market.
Scott: But for you, I mean, you see folks, you know, who maybe rushed into this business when the market was so hot, maybe think twice about it?
Pohlmann: I think we expect there will be less agents at the end of the year. I think that it’s very easy to list or, well, list a house and sell it—you can sneeze and sell it, you know, because the market sells itself. But I also think there’s a lot of fatigue about how difficult this market is. And we’ll have to see what happens at the end of the year.
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