After the most dramatic changes in supply and demand between April and July, the market has settled down and is making only small moves over the last few weeks. Despite the recent rise in interest rates, demand has not collapsed further, but remains pretty much at the same low level as last month. The arrival rate of new listings for sale is very low for the time of year. So in complete contrast to the second quarter, we have low new supply to accompany low demand. Contracts are being signed but so slowly that the active supply count is drifting higher as listing stay on the market longer. Things are surprisingly normal in terms of balance, but transaction volumes are much lower than we have been used to over the past decade.

There is little downward pressure on prices in this situation and what pressure there is has been largely caused by the overstocked iBuyer Opendoor. Other sellers are being more patient. Sentiment remains poor and confidence is low. If you have to sell quickly, you are facing a challenge and will probably need to sharpen your negotiating pencil. But foreclosures are at very low levels and anyone who expects a flood of distressed properties and lender-owned homes to drive prices down is dreaming of 2007. It is not happening in 2022 and probably not happening in 2023 unless economic conditions deteriorate far more than anticipated.

This is not a crash. The overabundance of enthusiasm and confidence we saw in March has evaporated and the market has started operating like it does when overall supply and demand are in balance. The is a strong overtone of fear, but this fear is not based on anything more solid than uncertainty. This calls for marketing skills and patience, not panic and freakish discounting. Keep calm and carry on.

You might think that mortgage rates over 6% are a big problem, but the housing market has operated for many decades with rates over 6% without it causing a meltdown. I remember when anything below 8% was regarded as a cheap loan. Yes, demand will be much lower while rates are high, but the thing everyone has to fear most is an over-abundance of supply. Right now, the evidence points the opposite way. New supply is tight and looks likely to remain that way for some time.

Market insights provided by the Cromford Report.