A few months ago, Amanda Pohlman, a real estate broker at Keller Williams Living in Cleveland, told “Marketplace” host Amy Scott how rising interest rates were pushing some buyers out of the market and sellers getting frustrated. were hanging on at unrealistic asking prices. Mortgage rates have since topped 7%, and Thursday’s consumer price index showed prices continuing to rise for rents and homeowner-equivalent rents.
Scott spoke with Pohlman, who said homes are staying on the market much longer than they were in July. The following is an edited transcript of their conversation.
Amy Scott: So knowing that real estate is local, what are you currently seeing in your market and in the Cleveland area?
Amanda Pohlmann: Well, in the Cleveland area, I would say the market has softened. What we are seeing now is a longer market time. We definitely have more homes available, though, I would say in the Midwest, because our homes are quite affordable, we still have a good amount of inventory, it’s climbing, and we’re still in a seller’s market for sure. There’s 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 homes to sell. For example, I’m in Solon, Ohio, and the average days on market has gone from less than a week to about 89 days. So we are definitely seeing more houses. Yeah, more houses sit. And I think that’s just because affordability is at an all time low with much higher interest rates.
Scott: Yeah. So Freddie Mac says today, 30-year mortgage rates are above 7%. I mean, at this time last year, it was less than 3%. So what does this mean for affordability?
Pohlmann: This means that the buying power of the buyer is that he has to pay a lot more money to get the house. So they’re looking for more creative ways, per se, to be able to get into a house if they have to right now, or they might decide to pull out of the market because interest rates seem to be too high. While in reality, they are really not very high yet. They’re just much higher than they were, as you said, a year ago.
Scott: Yeah. You know, the last time we spoke, I think it was in July, probably before the downturn you’re describing, you said that sales people were having a hard time being realistic [about prices] as the market began to slow. Are they still holding on, you know, longer than maybe they should? Or are they starting to see that, “You know what, if I have to move this house after 80 days on the market, I probably have to move down.”
Pohlmann: Yeah, I think there was a sticker shock because the market downturn happened so quickly, a lot of sellers look back three to six months and say, “Well, you know, how did my neighbor down the street get another $40,000? They need to understand that the time in the market could be longer, especially if they try to drive prices up. The market just isn’t as robust as it has been.
Scott: We have seen a reaction in your industry. Just this week, the brokerage firm Redfin announced that it was laying off 13% of its staff. Many of them are in his house flipping business. But you know, in every field, those who sell real estate feel it. How does it feel to be in this business right now?
Pohlmann: Yes, I saw that too. And their agents are employees, and most agents and other brokerages are 1099 [contractors]. This type of model has therefore not been tested during a market downturn. So we could 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, do you see people, you know, who maybe rushed into this business when the market was so hot, maybe thinking twice about it?
Pohlmann: I think we expect there to be fewer agents by the end of the year. I think it’s been so easy to put a house up for sale or, well, put a house up for sale and sell it – you can kind of sneeze and sell it, you know, because the market sells everything only. But I also think there’s a lot of fatigue around the difficulty of this market. And we’ll have to see what happens by the end of the year.
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